Source: https://chowinslaw.com/resources/texas-business-laws/300-derivative-proceedings-texas-business-organizations
Timestamp: 2019-04-23 04:27:30+00:00

Document:
(1) "Derivative proceeding" means a civil suit in the right of a domestic corporation or, to the extent provided by § 21.562, in the right of a foreign corporation.
(2) "Shareholder" includes a beneficial owner whose shares are held in a voting trust or by a nominee on the beneficial owner's behalf.
§ 21.552. STANDING TO BRING PROCEEDING.
(2) the shareholder fairly and adequately represents the interests of the corporation in enforcing the right of the corporation.
(a) A shareholder may not institute a derivative proceeding until the 91st day after the date a written demand is filed with the corporation stating with particularity the act, omission, or other matter that is the subject of the claim or challenge and requesting that the corporation take suitable action.
(3) irreparable injury to the corporation would result by waiting for the expiration of the 90-day period.
§ 21.554. DETERMINATION BY DIRECTORS OR INDEPENDENT PERSONS.
(3) a panel of one or more independent and disinterested persons appointed by the court on a motion by the corporation listing the names of the persons to be appointed and stating that, to the best of the corporation's knowledge, the persons to be appointed are disinterested and qualified to make the determinations contemplated by § 21.558.
(b) The court shall appoint a panel under Subsection (a)(3) if the court finds that the persons recommended by the corporation are independent and disinterested and are otherwise qualified with respect to expertise, experience, independent judgment, and other factors considered appropriate by the court under the circumstances to make the determinations. A person appointed by the court to a panel under this § may not be held liable to the corporation or the corporation's shareholders for an action taken or omission made by the person in that capacity, except for an act or omission constituting fraud or wilful misconduct.
§ 21.555. STAY OF PROCEEDING.
(a) If the domestic or foreign corporation that is the subject of a derivative proceeding commences an inquiry into the allegations made in a demand or petition and the person or group of persons described by § 21.554 is conducting an active review of the allegations in good faith, the court shall stay a derivative proceeding until the review is completed and a determination is made by the person or group regarding what further action, if any, should be taken.
(b) To obtain a stay, the domestic or foreign corporation shall provide the court with a written statement agreeing to advise the court and the shareholder making the demand of the determination promptly on the completion of the review of the matter. A stay, on application, may be reviewed every 60 days for the continued necessity of the stay.
(c) If the review and determination made by the person or group is not completed before the 61st day after the stay is ordered by the court, the stay may be renewed for one or more additional 60-day periods if the domestic or foreign corporation provides the court and the shareholder with a written statement of the status of the review and the reasons why a continued extension of the stay is necessary.
(3) the reasonableness of the procedures followed by the person or group in conducting the review.
(b) Discovery described by Subsection (a) may not be expanded to include a fact or substantive matter regarding the act, omission, or other matter that is the subject matter of the derivative proceeding. The scope of discovery may be expanded if the court determines after notice and hearing that a good faith review of the allegations for purposes of § 21.558 has not been made by an independent and disinterested person or group in accordance with that section.
§ 21.557. TOLLING OF STATUTE OF LIMITATIONS.
(2) the 31st day after the date the corporation advises the shareholder that the demand has been rejected or the review has been completed.
§ 21.558. DISMISSAL OF DERIVATIVE PROCEEDING.
(a) A court shall dismiss a derivative proceeding on a motion by the corporation if the person or group of persons described by § 21.554 determines in good faith, after conducting a reasonable inquiry and based on factors the person or group considers appropriate under the circumstances, that continuation of the derivative proceeding is not in the best interests of the corporation.
(2) the corporation in any other circumstance.
§ 21.559. PROCEEDING INSTITUTED AFTER DEMAND REJECTED.
If a derivative proceeding is instituted after a demand is rejected, the petition must allege with particularity facts that establish that the rejection was not made in accordance with the requirements of §§ 21.554 and 21.558.
§ 21.560. DISCONTINUANCE OR SETTLEMENT.
(a) A derivative proceeding may not be discontinued or settled without court approval.
(b) The court shall direct that notice be given to the affected shareholders if the court determines that a proposed discontinuance or settlement may substantially affect the interests of other shareholders.
§ 21.561. PAYMENT OF EXPENSES.
(3) expenses for which the domestic or foreign corporation or a corporate defendant may be required to indemnify another person.
(C) was interposed for an improper purpose, such as to harass, cause unnecessary delay, or cause a needless increase in the cost of litigation.
§ 21.562. APPLICATION TO FOREIGN CORPORATIONS.
(a) In a derivative proceeding brought in the right of a foreign corporation, the matters covered by this subchapter are governed by the laws of the jurisdiction of incorporation of the foreign corporation, except for §§ 21.555, 21.560, and 21.561, which are procedural provisions and do not relate to the internal affairs of the foreign corporation.
(b) In the case of matters relating to a foreign corporation under § 21.554, a reference to a person or group of persons described by that § refers to a person or group entitled under the laws of the jurisdiction of incorporation of the foreign corporation to review and dispose of a derivative proceeding. The standard of review of a decision made by the person or group to dismiss the derivative proceeding shall be governed by the laws of the jurisdiction of incorporation of the foreign corporation.
§ 21.563. CLOSELY HELD CORPORATION.
(2) no shares listed on a national securities exchange or regularly quoted in an over-the-counter market by one or more members of a national securities association.
(b) §§ 21.552-21.559 do not apply to a closely held corporation.
(2) a recovery in a direct or derivative proceeding by a shareholder may be paid directly to the plaintiff or to the corporation if necessary to protect the interests of creditors or other shareholders of the corporation.

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