Derivative Proceedings.

Ala. Code tit. 10A, ch. 2A, art. 7, div. D

in effect

Ala. Code § 10A-2A-7.40 Division Definitions.

10A-2A-7.40. Division Definitions. In this division: (1) COURT means the designated court, and if none, the circuit court for the county in which the corporation’s principal office is located in this state, and if none in this state, the circuit court for the county in which the corporation’s most recent registered office is located. (2) DERIVATIVE ACTION means a civil suit in the right of a corporation or, to the extent provided in Section 10A-2A-7.48, in the right of a foreign corporation. (3) STOCKHOLDER means a record stockholder, a beneficial stockholder, and an unrestricted voting trust beneficial owner. (Act 2019-94, §1; Act 2020-73, §7; Act 2025-281, §2.)

Ala. Code § 10A-2A-7.41 Right of Derivative Action.

10A-2A-7.41. Right of Derivative Action. A stockholder may commence or maintain a derivative action in the right of a corporation to enforce a right of the corporation by complying with this division. (Act 2019-94, §1.)

Ala. Code § 10A-2A-7.42 Standing.

10A-2A-7.42. Standing. A stockholder may commence or maintain a derivative action in the right of the corporation only if the stockholder: (1) fairly and adequately represents the interests of the corporation in enforcing the right of the corporation; and (2) either: (A) was a stockholder of the corporation at the time of the act or omission of which the stockholder complains; or (B) whose status as a stockholder devolved upon the person by operation of law from a person who was a stockholder at the time of the act or omission of which the stockholder complains. (Act 2019-94, §1.)

Ala. Code § 10A-2A-7.43 Demand.

10A-2A-7.43. Demand. A stockholder may commence a derivative action in the right of the corporation, if: (a) the stockholder first makes a written demand upon the corporation requesting that it bring an action to enforce the right and the corporation does not bring the action within a reasonable time; or (b) a demand under subsection (a) would be futile. (Act 2019-94, §1.)

Ala. Code § 10A-2A-7.44 Pleading.

10A-2A-7.44. Pleading. In a derivative action, the complaint must state with particularity: (a) the date and content of plaintiff’s demand and the corporation’s response by the corporation to the demand; or (b) why the demand should be excused as futile. (Act 2019-94, §1.)

Ala. Code § 10A-2A-7.45 Stay of Proceedings.

10A-2A-7.45. Stay of Proceedings. For the purpose of allowing the corporation time to undertake an inquiry into the allegations made in the demand or complaint commenced pursuant to this division, the court may stay any derivative action for the period the court deems appropriate. (Act 2019-94, §1.)

Ala. Code § 10A-2A-7.46 Discontinuance or Settlement.

10A-2A-7.46. Discontinuance or Settlement. A derivative action may not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to stockholders of the corporation in such manner as the court directs. (Act 2019-94, §1.)

Ala. Code § 10A-2A-7.47 Proceeds and Expenses.

10A-2A-7.47. Proceeds and Expenses. (a) Except as otherwise provided in subsection (b): (1) any proceeds or other benefits of a derivative action, whether by judgment, compromise, or settlement, belong to the corporation and not to the derivative plaintiff; and (2) if the derivative plaintiff receives any proceeds, the derivative plaintiff shall immediately remit them to the corporation. (b) If a derivative action is successful in whole or in part, the court may award the plaintiff reasonable expenses, including reasonable attorney’s fees, from the recovery of the corporation. (Act 2019-94, §1.)

Ala. Code § 10A-2A-7.48 Applicability to Foreign Corporations.

10A-2A-7.48. Applicability to Foreign Corporations. In any derivative action in the right of a foreign corporation, the right of a person to commence or maintain a derivative action in the right of a foreign corporation, and any matters raised in the action covered by Sections 10A-2A-7.42 through 10A-2A-7.47, shall be governed by the law of the jurisdiction under which the foreign corporation was formed; except that any matters raised in the action covered by Sections 10A-2A-7.45, 10A-2A-7.46, and 10A-2A-7.47 shall be governed by the law of this state. (Act 2019-94, §1.)

Source: Alabama Legislature (alison.legislature.state.al.us)URL: https://alison.legislature.state.al.us/code-of-alabamaFetched: 10/20/2026