Iowa Code 504.635 – Dismissal
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1. A derivative proceeding shall be dismissed by the court on motion by the corporation if one of the groups specified in subsection 2 or 6 has determined in good faith after conducting a reasonable inquiry upon which its conclusions are based that the maintenance of the derivative proceeding is not in the best interests of the corporation. A corporation moving to dismiss on this basis shall submit in support of the motion a short and concise statement of the reasons for its determination.
Terms Used In Iowa Code 504.635
- board of directors: means the board of directors of a corporation except that no person or group of persons are the board of directors because of powers delegated to that person or group pursuant to section 504. See Iowa Code 504.141
- Complaint: A written statement by the plaintiff stating the wrongs allegedly committed by the defendant.
- Corporation: means a public benefit, mutual benefit, or religious corporation. See Iowa Code 504.141
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Defendant: In a civil suit, the person complained against; in a criminal case, the person accused of the crime.
- Directors: means individuals, designated in the articles or bylaws or elected by the incorporators, and their successors and individuals elected or appointed by any other name or title to act as members of the board. See Iowa Code 504.141
- Discovery: Lawyers' examination, before trial, of facts and documents in possession of the opponents to help the lawyers prepare for trial.
- Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
- following: when used by way of reference to a chapter or other part of a statute mean the next preceding or next following chapter or other part. See Iowa Code 4.1
- Member: means a person who on more than one occasion, pursuant to the provisions of a corporation's articles or bylaws, has a right to vote for the election of a director or directors of a corporation, irrespective of how a member is defined in the articles or bylaws of the corporation. See Iowa Code 504.141
- Person: includes any individual or entity. See Iowa Code 504.141
- Plaintiff: The person who files the complaint in a civil lawsuit.
- Proceeding: includes a civil suit and criminal, administrative, or investigatory actions. See Iowa Code 504.141
- Quorum: The number of legislators that must be present to do business.
- Vote: includes authorization by written ballot and written consent. See Iowa Code 504.141
2. Unless a panel is appointed pursuant to subsection 6, the determination in subsection 1 shall be made by one of the following:
a. A majority vote of independent directors present at a meeting of the board of directors if the independent directors constitute a quorum.
b. A majority vote of a committee consisting of two or more independent directors appointed by majority vote of independent directors present at a meeting of the board of directors, whether or not such independent directors constitute a quorum.
3. None of the following shall by itself cause a director to be considered not independent for purposes of this section:
a. The nomination or election of the director by persons who are defendants in the derivative proceeding or against whom action is demanded.
b. The naming of the director as a defendant in the derivative proceeding or as a person against whom action is demanded.
c. The approval by the director of the act being challenged in the derivative proceeding or demand if the act resulted in no personal benefit to the director.
4. a. If a derivative proceeding is commenced after a determination has been made rejecting a demand by a member or director, the complaint shall allege with particularity facts establishing one of the following:
(1) That a majority of the board of directors did not consist of independent directors at the time the determination was made.
(2) That the requirements of subsection 1 have not been met.
b. All discovery and other proceedings shall be stayed during the pendency of any motion to dismiss unless the court finds upon the motion of any party that particularized discovery is necessary to preserve evidence or prevent undue prejudice to that party.
5. If a majority of the board of directors does not consist of independent directors at the time the determination is made, the corporation shall have the burden of proving that the requirements of subsection 1 have been met. If a majority of the board of directors consists of independent directors at the time the determination is made, the plaintiff shall have the burden of proving that the requirements of subsection 1 have not been met.
6. The court may appoint a panel of one or more independent persons upon motion by the corporation to make a determination whether the maintenance of the derivative proceeding is in the best interests of the corporation. In such case, the plaintiff shall have the burden of proving that the requirements of subsection 1 have not been met.