KRS § 275.337 — KY Code / Title XXIII / Chapter 275 / Section 275.337
275.337 Derivative actions
Status: in_force

275.337 Derivative actions.

(1) A member may maintain a direct action against a limited liability company,

another member, or a manager to redress an injury sustained by, or to enforce

a duty owed to, the member if the member can prevail without showing an

injury or breach of duty to the company.

(2) A member may maintain a derivative action to redress an injury sustained by or

enforce a duty owed to a limited liability company if:

(a) The member shall first make a demand on the other members and, if the

company is manager-managed, the managers, requesting that they cause

the company to bring an action to redress the injury or enforce the right,

and they do not bring the action within a reasonable time; or

(b) A demand would be futile.

(3) A derivative action on behalf of a limited liability company shall be maintained

only by a person that is a member at the time the action is commenced and

who:

(a) Was a member when the conduct giving rise to the action occurred; or

(b) Acquired the status as a member by operation of law or pursuant to the

terms of the operating agreement from a person that was a member at

the time of the conduct giving rise to the action occurred.

(4) In a derivative action on behalf of the limited liability company, the complaint

shall state with particularity:

(a) The date and content of the member's demand and the response to the

demand; or

(b) The reason the demand should be excused as futile.

(5) The derivative proceeding shall not be maintained if:

(a) It appears that the person commencing the proceeding does not fairly

and adequately represent the interests of the members in enforcing the

rights of the limited liability company; or

(b) The person commencing the proceeding ceases to be a member in the

limited liability company.

(6) Except as otherwise provided in subsection (9) of this section:

(a) Any proceeds or other benefits of a derivative action on behalf of a limited

liability company, whether by judgment, compromise, or settlement, are

the property of the company and not of the plaintiff; and

(b) If the plaintiff receives any proceeds or other benefits, the plaintiff shall

immediately remit them to the company.

(7) A derivative action on behalf of a limited liability company shall not be

voluntarily dismissed or settled without the court's approval.

(8) The proper venue for a direct action under subsection (1) of this section or a

derivative action shall be the Circuit Court for the county in which the company

maintains its registered office and agent.

(9) On termination of the proceeding brought pursuant to this section, the court

may:

(a) Require the plaintiff member to pay any defendant's reasonable

expenses, including counsel fees, incurred in defending the proceeding to

the extent it finds that the proceeding or any portion thereof was

commenced without reasonable cause or for an improper purpose; and

(b) Require the limited liability company to pay the plaintiff member's

reasonable expenses, including counsel fees, incurred in the proceeding

to the extent it finds that the proceeding has resulted in a substantial

benefit to the company.