Source: https://www.azleg.gov/arsDetail/?title=10 (official Arizona State Legislature site). Retrieved 2026-07-07. Section range: Sec: 10-701-10-747. 28 sections.
10-701. Annual meeting
A. A corporation shall hold a meeting of shareholders annually at a time stated in or fixed in accordance with the bylaws.
B. Annual shareholders' meetings may be held in or out of this state at the place stated in or fixed in accordance with the bylaws. If no place is stated in or fixed in accordance with the bylaws, annual meetings shall be held at the corporation's known place of business.
C. The failure to hold an annual meeting at the time stated in or fixed in accordance with a corporation's bylaws does not affect the validity of any corporate action.
D. Any water users' association may provide in its articles of incorporation or bylaws for any method of electing its governing body or bodies on a biannual or more frequent basis, in which event the water users' association has no obligation to hold an annual meeting notwithstanding subsection A of this section and section 10-803. Whenever a meeting of shareholders is required or permitted under this chapter, a water users' association, without conducting such a meeting, may accomplish the purpose of such meeting through an election by its shareholders pursuant to its articles of incorporation.
10-702. Special meeting
A. Except as provided in section 10-2703, a corporation shall hold a special meeting of shareholders either:
1. On the call of its board of directors or the person or persons authorized to do so by the articles of incorporation or bylaws.
2. As provided in section 10-810, subsection D.
B. If not otherwise fixed under section 10-703 or 10-707, the record date for determining shareholders entitled to demand a special meeting is the date the first shareholder signs the demand.
C. Special shareholders' meetings may be held in or out of this state at the place stated in or fixed in accordance with the bylaws. If no place is stated in or fixed in accordance with the bylaws, special meetings shall be held at the corporation's principal office.
D. Only business within the purpose or purposes described in the meeting notice required by section 10-705, subsection C may be conducted at a special shareholders' meeting.
10-703. Court ordered meeting
A. The court in the county where a corporation's known place of business is located may summarily order either:
1. An annual meeting to be held on application of any shareholder of the corporation entitled to participate in an annual meeting if an annual meeting was not held within the earlier of three months after the date specified for the annual meeting in the bylaws or fifteen months after its last annual meeting.
2. A special meeting to be held on application of a shareholder who signed a demand for a special meeting valid under section 10-702, if either:
(a) Notice of the special meeting was not given within thirty days after the date the demand was delivered to the corporation's secretary.
(b) The special meeting was not held in accordance with the notice.
B. The court may fix the time and place of the meeting, determine the shares entitled to participate in the meeting, specify a record date for determining shareholders entitled to notice of and to vote at the meeting, prescribe the form and content of the meeting notice, fix the quorum required for specific matters to be considered at the meeting or direct that the votes represented at the meeting constitute a quorum for action on those matters and enter other orders necessary to accomplish the purpose or purposes of the meeting.
10-704. Action by shareholders without meeting; notice
A. Except as provided in subsection B of this section, an action required or permitted by chapters 1 through 17 of this title to be taken at a shareholders' meeting may be taken without a meeting if there is written consent by the holders of outstanding shares that are entitled to at least the minimum number of votes necessary to authorize or take the action at a meeting at which all shares entitled to vote on the action are present and voted. The action taken by the written consent of the shareholders must be evidenced by one or more written consents describing the action taken and signed by holders of outstanding shares that are entitled to at least the minimum number of votes necessary to authorize or take the action at a meeting at which all shares entitled to vote on the action are present and voted. The written consents to the action must be delivered to the corporation for inclusion in the minutes or filing with the corporate records.
B. An action taken by shareholders without a shareholders' meeting must be taken by all shareholders and must be evidenced by written consent of all shareholders of the corporation if any of the following applies:
1. The action involves the election of directors or the removal of one or more directors.
2. The articles of incorporation or bylaws of the corporation require that an action taken by shareholders without a shareholders' meeting must be taken by all shareholders of the corporation.
3. The corporation is an issuing public corporation, as defined in section 10-2701, unless otherwise provided in its articles of incorporation or bylaws.
4. The corporation was formed in this state before August 6, 2016 unless its articles of incorporation or bylaws are amended after August 6, 2016 to provide that any action that is required or allowed to be taken at a shareholders' meeting may be taken without a meeting if there is written consent setting forth the action by the holders of outstanding shares that have at least the minimum number of votes necessary to authorize or take the action at a meeting at which all shares entitled to vote on the action are present and voted. For the purposes of this paragraph, a corporation that becomes a corporation in this state by domestication, conversion or division before August 6, 2016 is deemed formed in this state before August 6, 2016.
C. The written consents described in subsections A and B of this section include electronic transmission. All written consents must be included in the minutes or filed with the corporate records. The filing must be in a paper format if the minutes are maintained in a paper format and must be in an electronic format if the minutes are maintained in an electronic format.
D. If not otherwise fixed under section 10-703 or 10-707, the record date for determining shareholders entitled to take action without a meeting is the date the first shareholder signs the consent under subsection A or B of this section.
E. A consent signed under this section has the effect of a meeting vote and may be described as such in any document.
F. Unless otherwise specified in the consents, the action is effective on the date that the consents as prescribed by subsection A or B of this section have been delivered to the corporation, except that if chapters 1 through 17 of this title require that notice of proposed actions be given to shareholders not entitled to vote and the action is to be taken by unanimous consent of the shareholders entitled to vote, the effective date is not before ten days after the corporation gives its shareholders not entitled to vote written notice of the proposed action. The notice must contain or be accompanied by the same material that under chapters 1 through 17 of this title would have been required to be sent to shareholders not entitled to vote in a notice of meeting at which the proposed action would have been submitted to the shareholders for action.
G. Any shareholder may revoke the shareholder's consent by delivering a signed revocation of the consent to the president or secretary before the date that the consents as prescribed by subsection A or B of this section have been delivered to the corporation.
H. Notice of the taking of a corporate action without a meeting must be given within thirty days after the effective date of the corporate action to both of the following:
1. Each shareholder of record on the record date for determining shareholders who are entitled to take the action pursuant to subsection D of this section and who did not consent to the action in writing.
2. Each shareholder who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for notice of the meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the corporation pursuant to subsection A of this section.
10-705. Notice of meeting
A. A corporation shall notify shareholders of the date, time and place of each annual and special shareholders' meeting at least ten but not more than sixty days before the meeting date. Unless chapters 1 through 17 of this title or the articles of incorporation require otherwise, the corporation is required to give notice only to shareholders entitled to vote at the meeting.
B. Unless chapters 1 through 17 of this title or the articles of incorporation require otherwise, notice of an annual meeting need not include a description of the purpose or purposes for which the meeting is called.
C. Notice of a special meeting shall include a description of the purpose or purposes for which the meeting is called.
D. If not otherwise fixed under section 10-703 or 10-707, the record date for determining shareholders entitled to notice of and to vote at an annual or special shareholders' meeting is the day before the effective date of the first notice to shareholders.
E. Unless the bylaws require otherwise, if an annual or special shareholders' meeting is adjourned to a different date, time or place, notice need not be given of the new date, time or place if the new date, time or place is announced at the meeting before adjournment. However, if a new record date for the adjourned meeting is or must be fixed under section 10-707, notice of the adjourned meeting shall be given under this section to persons who are shareholders as of the new record date.
10-706. Waiver of notice
A. A shareholder may waive any notice required by chapters 1 through 17 of this title, the articles of incorporation or the bylaws before or after the date and time stated in the notice. The waiver shall be in writing, signed by the shareholder entitled to the notice and delivered to the corporation for inclusion in the minutes or filing with the corporate records.
B. A shareholder's attendance at a meeting:
1. Waives objection to lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting.
2. Waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented.
10-707. Record date
A. The bylaws may fix or provide the manner of fixing the record date for one or more voting groups in order to determine the shareholders entitled to notice of a shareholders' meeting, to demand a special meeting, to vote or to take any other action. If the bylaws do not fix or provide for fixing a record date, the board of directors of the corporation may fix a future date as the record date.
B. A record date fixed under this section may not be more than seventy days before the meeting or action requiring a determination of shareholders.
C. A determination of shareholders entitled to notice of or to vote at a shareholders' meeting is effective for any adjournment of the meeting unless the board of directors fixes a new record date, which it shall do if the meeting is adjourned to a date more than one hundred twenty days after the date fixed for the original meeting.
D. If a court orders a meeting adjournment to a date more than one hundred twenty days after the date fixed for the original meeting, it may provide that the original record date continues in effect or it may fix a new record date.
10-708. Participation in shareholders' meetings; remote communication
A. Unless the articles of incorporation or bylaws provide otherwise, the board of directors may permit any or all shareholders to participate in an annual or special shareholders' meeting by or conduct the meeting through use of any means of remote communication. If the board of directors elects to permit participation by means of remote communication, the notice of the meeting shall specify how a shareholder may participate in the meeting by means of remote communication. Participation may be limited by the board of directors to specified locations or means of communication.
B. Unless the articles of incorporation or bylaws provide otherwise, if authorized by the board of directors and subject to such guidelines and procedures as the board of directors may adopt, shareholders not physically present at a meeting of shareholders, by means of remote communication, may both:
1. Participate in a meeting of shareholders.
2. Be deemed present in person and vote at a meeting of shareholders, whether the meeting is to be held at a designated place or solely by means of remote communication if the corporation does all of the following:
(a) Implements reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a shareholder.
(b) Implements reasonable measures to provide shareholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the shareholders substantially concurrently with the proceedings. Participation may be through verbal, written or other suitable means of communication as described by this section.
(c) Maintains a record of the vote or other action if any shareholder votes or takes other action at the meeting by means of remote communication.
C. All votes of shareholders must be in writing, unless otherwise provided for in the articles of incorporation or bylaws. If authorized by the articles of incorporation, bylaws or board of directors, the requirement of a writing may be satisfied by a vote submitted by electronic transmission if the electronic transmission is either set forth or is submitted with information from which it can be determined that the electronic transmission was authorized by the shareholder.
10-720. Shareholders' list for meeting
A. After fixing a record date for a meeting, a corporation shall prepare an alphabetical list of the names of all of its shareholders who are entitled to notice of a shareholders' meeting. The list shall be arranged by voting group, and within each voting group by class or series of shares, and shall show the address of and number of shares held by each shareholder.
B. The shareholders' list shall be available for inspection by any shareholder, beginning two business days after notice of the meeting is given for which the list was prepared and continuing through the meeting, at the corporation's principal office, the office of the corporation's transfer agent if specified in the meeting notice or at another place identified in the meeting notice in the city where the meeting will be held. A shareholder, its agent or its attorney on written demand may inspect and, subject to the requirements of section 10-1602, subsection C, may copy the list, during regular business hours and at his expense, during the period it is available for inspection.
C. The corporation shall make the shareholders' list available at the meeting, and any shareholder, its agent or its attorney may inspect the list at any time during the meeting or any adjournment.
D. If the corporation refuses to allow a shareholder, its agent or its attorney to inspect the shareholders' list before or at the meeting or copy the list as permitted by subsection B of this section, the court in the county where a corporation's principal office, or, if none in this state, its known place of business, is located, on application of the shareholder, may summarily order the inspection or copying at the corporation's expense and may postpone the meeting for which the list was prepared until the inspection or copying is complete.
E. Refusal or failure to prepare or make available the shareholders' list does not affect the validity of action taken at the meeting.
10-721. Voting entitlement of shares
A. Except as provided in subsections B and C of this section or section 10-728 or 10-2725 or unless the articles of incorporation provide otherwise, each outstanding share, regardless of class, is entitled to one vote on each matter voted on at a shareholders' meeting. Only shares are entitled to vote.
B. Absent special circumstances, the shares of a corporation are not entitled to vote if they are owned directly or indirectly by a second corporation, domestic or foreign, and the first corporation owns directly or indirectly a majority of the shares entitled to vote for directors of the second corporation.
C. Subsection B of this section does not limit the power of a corporation to vote any shares, including its own shares, held by it in a fiduciary capacity.
D. Redeemable shares are not deemed to be outstanding and are not entitled to vote after notice of redemption is mailed to the holders and an amount sufficient to redeem the shares has been deposited with any bank, trust company or other financial institution under an irrevocable obligation to pay the holders the redemption price on surrender of the certificates representing the shares, in the case of certificated shares.
E. Notwithstanding the other provisions of this section, a water users' association may provide in its articles of incorporation the qualifications of shareholders to vote, eliminate the right to vote by proxy, specify the locations where votes may be cast and limit voting to natural persons. A water users' association may adopt bylaws for the registration of voters and the method of holding elections.
10-722. Proxies
A. A shareholder may vote its shares in person or by proxy.
B. A shareholder or the shareholder's agent or attorney-in-fact appoints a proxy to vote or otherwise act for the shareholder by signing an appointment form or by an electronic transmission. An electronic transmission must contain or be accompanied by information from which the recipient can determine the date of the transmission and that the transmission was authorized by the sender or the sender's agent or attorney-in-fact.
C. An appointment of a proxy is effective when the secretary, inspector of election or other officer or agent who is authorized to tabulate votes receives a signed appointment form or an electronic transmission of the appointment. Unless the articles of incorporation or bylaws provide otherwise, an appointment is valid for twelve months unless a shorter or longer period is expressly provided in the appointment form.
D. An appointment of a proxy is revocable by the shareholder unless the proxy conspicuously states that it is irrevocable and it is coupled with an interest. Proxies coupled with an interest include the appointment of any of the following:
1. A pledgee.
2. A person who purchased, agreed to purchase, holds an option to purchase or holds any other right to acquire the shares.
3. A creditor of the corporation who extended or continued credit to the corporation under terms requiring the appointment.
4. An employee of the corporation whose employment contract requires the appointment.
5. A party to a voting agreement created under section 10-731.
E. The death or incapacity of the shareholder appointing a proxy does not affect the right of the corporation to accept the proxy's authority unless written notice of the death or incapacity is received by the secretary, the inspector of election or other officer or agent authorized to tabulate votes before the proxy exercises the proxy's authority under the appointment.
F. An appointment that is made irrevocable under subsection D of this section is revoked when the interest with which it is coupled is extinguished.
G. A transferee for value of shares subject to an irrevocable appointment may revoke the appointment if the transferee did not know of its existence when the transferee acquired the shares and the existence of the irrevocable appointment was not noted conspicuously on the certificate representing the shares or on the information statement for shares without certificates.
H. Subject to section 10-724 and to any express limitation on the proxy's authority stated in the appointment form or electronic transmission, a corporation is entitled to accept the proxy's vote or other action as that of the shareholder executing the proxy.
I. Notwithstanding the other provisions of this section, a water users' association may provide in its articles of incorporation the qualifications of shareholders to vote, eliminate the right to vote by proxy, specify the locations where votes may be cast and limit voting to natural persons. A water users' association may adopt bylaws for the registration of voters and method of holding elections.
10-723. Shares held by nominees
A. A corporation may establish a procedure by which the beneficial owner of shares that are registered in the name of a nominee is recognized by the corporation as the shareholder. The extent of this recognition may be determined in the procedure.
B. The procedure may set forth:
1. The types of nominees to which it applies.
2. The rights or privileges that the corporation recognizes in a beneficial owner.
3. The manner in which the procedure is selected by the nominee.
4. The information that must be provided when the procedure is selected.
5. The period for which selection of the procedure is effective.
6. Other aspects of the rights and duties created.
10-724. Corporation's acceptance of votes
A. If the name signed on a vote, consent, waiver or proxy appointment corresponds to the name of a shareholder, the corporation if acting in good faith is entitled to accept the vote, consent, waiver or proxy appointment and give it effect as the act of the shareholder.
B. If the name signed on a vote, consent, waiver or proxy appointment does not correspond to the name of its shareholder, the corporation if acting in good faith is nevertheless entitled to accept the vote, consent, waiver or proxy appointment and give it effect as the act of the shareholder if:
1. The shareholder is an entity and the name signed purports to be that of an officer or agent of the entity.
2. The name signed purports to be that of an administrator, executor, guardian or conservator representing the shareholder and, if the corporation requests, evidence of fiduciary status acceptable to the corporation has been presented with respect to the vote, consent, waiver or proxy appointment.
3. The name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the corporation requests, evidence of this status acceptable to the corporation has been presented with respect to the vote, consent, waiver or proxy appointment.
4. The name signed purports to be that of a pledgee, beneficial owner or attorney-in-fact of the shareholder and, if the corporation requests, evidence acceptable to the corporation of the signatory's authority to sign for the shareholder has been presented with respect to the vote, consent, waiver or proxy appointment.
5. Two or more persons are the shareholder as cotenants or fiduciaries and the name signed purports to be the name of at least one of the co-owners and the person signing appears to be acting on behalf of all of the co-owners.
C. The corporation is entitled to reject any vote, consent, waiver or proxy appointment if the secretary or other officer or agent authorized to tabulate votes, acting in good faith, has a reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the shareholder.
D. The corporation and its officer or its agent who accepts or rejects a vote, consent, waiver or proxy appointment in good faith and in accordance with the standards of this section are not liable in damages to the shareholder for the consequences of the acceptance or rejection.
E. Corporate action based on the acceptance or rejection of a vote, consent, waiver or proxy appointment under this section is valid unless a court of competent jurisdiction determines otherwise.
10-725. Quorum and voting requirements for voting groups
A. Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if the quorum of those shares exists with respect to that matter. Unless the articles of incorporation or chapters 1 through 17 of this title provide otherwise, a majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter.
B. Unless otherwise provided in the articles of incorporation or bylaws, once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting.
C. If a quorum exists, action on a matter, other than the election of directors, by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the articles of incorporation or chapters 1 through 17 of this title require a greater number of affirmative votes.
D. An amendment of articles of incorporation adding, changing or deleting a quorum or voting requirement for a voting group greater than specified in subsection A or C of this section is governed by section 10-727.
E. The election of directors is governed by section 10-728.
10-726. Action by single and multiple voting groups
A. If the articles of incorporation or chapters 1 through 17 of this title provide for voting by a single voting group on a matter, action on that matter is taken when voted on by that voting group as provided in section 10-725.
B. If the articles of incorporation or chapters 1 through 17 of this title provide for voting by two or more voting groups on a matter, action on that matter is taken when voted on by each of those voting groups counted separately as provided in section 10-725. Voting by individual voting groups entitled to vote on a matter need not be simultaneous.
10-727. Greater quorum or voting requirements
A. The articles of incorporation may provide for a greater quorum or voting requirement for shareholders or voting groups of shareholders than is provided for by chapters 1 through 17 of this title.
B. An amendment to the articles of incorporation that adds, changes or deletes a greater quorum or voting requirement must meet the same quorum requirement and be adopted by the same vote and voting groups required to take action under the quorum and voting requirements then in effect or proposed to be adopted, whichever is greater.
10-728. Voting for directors; cumulative voting
A. Unless otherwise provided in the articles of incorporation, directors are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present.
B. At each election for directors, shareholders are entitled to cumulate their votes by multiplying the number of votes they are entitled to cast by the number of directors for whom they are entitled to vote and casting the product for a single candidate or distributing the product among two or more candidates.
10-730. Voting trusts
One or more shareholders may create a voting trust, conferring on one or more trustees the right to vote or otherwise act for them, by signing an agreement setting out the provisions of the trust and transferring their shares to the trustee or trustees. The agreement may contain any lawful provision not inconsistent with the purposes of the trust.
10-731. Voting agreements
A. Two or more shareholders may provide for the manner in which they will vote their shares by signing an agreement for that purpose.
B. Unless otherwise provided in the voting agreement, a voting agreement created under this section is specifically enforceable.
10-732. Shareholder agreements
A. An agreement among the shareholders of a corporation that complies with this section is effective among the shareholders and the corporation even though it is inconsistent with one or more other provisions of chapters 1 through 17 of this title if it meets any of the following conditions:
1. Restricts the discretion or powers of the board of directors.
2. Governs the authorization or making of distributions whether or not in proportion to ownership of shares, subject to the limitations in section 10-640.
3. Establishes who shall be directors or officers of the corporation, their terms and conditions of office or employment or their manner of selection or removal.
4. Governs, in general or in regard to specific matters, the exercise or division of voting power by or between the shareholders and directors or by or among any of them, including use of weighted voting rights or director proxies.
5. Establishes the terms and conditions of any agreement for the transfer or use of property or the provision of services between the corporation and any shareholder, director, officer or employee of the corporation or among any of them.
6. Transfers to one or more shareholders or other persons all or part of the authority to exercise the corporate powers or to manage the business and affairs of the corporation, including the resolution of any issue about which there exists a deadlock among directors or shareholders.
7. Requires dissolution of the corporation at the request of one or more of the shareholders or on the occurrence of a specified event or contingency.
8. Establishes the terms and conditions of employment of shareholders.
9. Addresses the use of arbitration or other forms of dispute resolution to resolve disputes among shareholders.
10. Restricts the transfer of shares.
11. Otherwise governs the exercise of the corporate powers or the management of the business and affairs of the corporation, its liquidation and dissolution or the relationship among the shareholders, the directors and the corporation, or among any of them.
B. An agreement authorized by this section shall be:
1. Set forth either:
(a) In the articles of incorporation or bylaws and approved by all persons who are shareholders at the time of the agreement.
(b) In a written agreement that is signed by all persons who are shareholders at the time of the agreement and that is filed with the corporation.
2. Subject to amendment or termination only by all persons who are shareholders at the time of the amendment, unless the agreement provides otherwise.
3. Valid for the duration of the corporation's existence, unless the agreement provides otherwise.
C. An agreement authorized by this section is enforceable by any person with standing. The existence of an agreement authorized by this section shall be noted conspicuously on the front or back of each certificate for outstanding shares or on the information statement required by section 10-626, subsection B. The failure to note the existence of the agreement on the certificate or information statement does not affect the validity of the agreement or any action taken pursuant to it. Any purchaser of shares who at the time of purchase did not have knowledge of the existence of the agreement is entitled to rescission of the purchase. A purchaser shall be deemed to have knowledge of the existence of the agreement if its existence is noted on the certificate or information statement for the shares in compliance with this subsection and, if the shares are not represented by a certificate, the information statement is delivered to the purchaser at or before the time of purchase of the shares or the purchaser has actual notice of the existence of the agreement at the time of purchase. An action to enforce the right of rescission authorized by this subsection must be commenced within the earlier of ninety days after discovery of the existence of the agreement or two years after the time of the purchase of the shares.
D. An agreement authorized by this section ceases to be effective when shares of the corporation are listed on a national securities exchange or are regularly traded in a market maintained by one or more members of a national or affiliated securities association. If the agreement ceases to be effective for any reason, the board of directors, if the agreement is contained or referred to in the corporation's articles of incorporation or bylaws, may adopt an amendment to the articles of incorporation or bylaws, without shareholder action, to delete the agreement and any references to it.
E. An agreement that is authorized by this section and that limits the discretion or powers of the board of directors relieves the directors of and imposes on the person or persons in whom such discretion or powers are vested liability for acts or omissions imposed by law on directors to the extent that the discretion or powers of the directors are limited by the agreement.
F. The existence or performance of an agreement authorized by this section is not a ground for imposing personal liability on any shareholder for the acts or debts of the corporation even if the agreement or its performance treats the corporation as if it were a partnership or results in failure to observe the corporate formalities otherwise applicable to the matters governed by the agreement.
G. Incorporators or subscribers for shares may act as shareholders with respect to an agreement authorized by this section if no shares have been issued when the agreement is made.
H. This section does not apply to, limit or invalidate agreements that are otherwise valid or authorized without regard to this section, including without limitation shareholder agreements between or among some or all of the shareholders or agreements between or among the corporation and one or more shareholders. The procedure set forth in this section is not the exclusive method of agreement among shareholders or among shareholders and the corporation with respect to any of the matters described in this section.
10-740. Definitions
In this article, unless the context otherwise requires:
1. "Derivative proceeding" means a civil suit in the right of a domestic corporation or, to the extent provided in section 10-747, in the right of a foreign corporation.
2. "Independent person" means a person with no personal interest in the transaction and no personal or other relationship which influences the person.
3. "Shareholder" includes a beneficial owner whose shares are held in a voting trust or are held by a nominee on the beneficial owner's behalf.
10-741. Standing
A shareholder may not commence or maintain a derivative proceeding unless the shareholder both:
1. Was a shareholder of the corporation at the time of the act or omission complained of or became a shareholder through transfer by operation of law from one who was a shareholder at that time.
2. Fairly and adequately represents the interests of the corporation in enforcing the right of the corporation.
10-742. Demand
No shareholder may commence a derivative proceeding until both:
1. A written demand has been made on the corporation to take suitable action.
2. Ninety days have expired from the date the demand was made unless the shareholder has earlier been notified that the demand has been rejected by the corporation or unless the statute of limitations will expire within the ninety days or unless irreparable injury to the corporation would result by waiting for the expiration of the ninety day period.
10-743. Stay of proceedings
If the corporation commences an inquiry into the allegations made in the demand or complaint, the court may stay any derivative proceeding for such period as the court deems appropriate.
10-744. Dismissal
A. A derivative proceeding may be dismissed by the court on motion by the corporation on any legal grounds including the group specified in subsection B has determined in good faith after conducting a reasonable inquiry on which its conclusions are based that the maintenance of the derivative proceeding is not in the best interests of the corporation.
B. The court may appoint a panel of one or more independent persons on motion by the corporation to determine whether the maintenance of the derivative proceeding is in the best interests of the corporation. In such case, the plaintiff has the burden of proving by clear and convincing evidence that the requirements of subsection A have not been met. A person appointed by the court is not liable whatsoever for a determination made pursuant to this section.
10-745. Discontinuance or settlement
A derivative proceeding may not be discontinued or settled without the court's approval. If the court determines that a proposed discontinuance or settlement will substantially affect the interests of the corporation's shareholders or a class of shareholders, the court shall direct that notice be given to the shareholders affected.
10-746. Payment of expenses
On termination of the derivative proceeding the court may either:
1. Order the corporation to pay the plaintiff's reasonable expenses, including attorney fees, incurred in the proceeding if it finds that the proceeding has resulted in a substantial benefit to the corporation.
2. Order the plaintiff to pay any defendant's reasonable expenses, including attorney fees, incurred in defending the proceeding if it finds that the proceeding was commenced or maintained without reasonable cause or for an improper purpose.
3. Order a party to pay an opposing party's reasonable expenses, including attorney fees, incurred because of the filing of any pleading, motion or other paper, if it finds that the pleading, motion or other paper was not well grounded in fact, after reasonable inquiry, or warranted by existing law or a good faith argument for the extension, modification or reversal of existing law and was interposed for an improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.
10-747. Applicability to foreign corporations
In any derivative proceeding in the right of a foreign corporation, the matters covered by this article are governed by the laws of the jurisdiction of incorporation of the foreign corporation except for sections 10-743, 10-745 and 10-746.