Derivative Actions

O.C.G.A. tit. 14, ch. 11, art. 8

in effect

O.C.G.A. § 14-11-801 Right of member to bring derivative action.

14-11-801. Right of member to bring derivative action. A member may commence a derivative action in the right of the limited liability company to recover a judgment in its favor if all of the following conditions are met: (1) Either management of the limited liability company is vested in a manager or managers who have the sole authority to cause the limited liability company to sue in its own right or management of the limited liability company is vested in the members but the plaintiff does not have the authority to cause the limited liability company to sue in its own right under the provisions of the articles of organization or a written operating agreement; (2) The plaintiff has made written demand on those managers or those members with such authority requesting that such managers or such members take suitable action; (3) Ninety days have expired from the date the demand was made unless the member has earlier been notified that the demand has been rejected by the limited liability company or unless irreparable injury to the limited liability company would result by waiting for the expiration of the 90 day period; (4) The plaintiff: (A) Is a member of the limited liability company at the time of bringing the action; and (B) Was a member of the limited liability company at the time of the transaction of which he or she complains, or his or her status as a member of the limited liability company has devolved upon him or her by operation of law from a person who was a member at the time of the transaction; and (5) The plaintiff fairly and adequately represents the interests of the limited liability company in enforcing the right of the limited liability company. (Code 1981, § 14-11-801, enacted by Ga. L. 1993, p. 123, § 1.) (Amended by Ga. L. 2026, Act 460 (HB 1185), eff. July 1, 2026.)

O.C.G.A. § 14-11-802 Complaint.

14-11-802. Complaint. In a derivative action, the complaint must set forth with particularity the effort of the plaintiff to secure commencement of the action by the managers or the members who would otherwise have the authority to cause the limited liability company to sue in its own right. (Code 1981, § 14-11-802, enacted by Ga. L. 1993, p. 123, § 1.)

O.C.G.A. § 14-11-803 Stay of proceedings.

14-11-803. Stay of proceedings. If the limited liability company commences an inquiry into the allegations made in the demand or complaint, the court may stay any derivative action for such period as the court deems appropriate. (Code 1981, § 14-11-803, enacted by Ga. L. 1993, p. 123, § 1.)

O.C.G.A. § 14-11-804 Discontinuance or settlement.

14-11-804. Discontinuance or settlement. Except as otherwise provided by the articles of organization or written operating agreement, a derivative action 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 limited liability company's members, the court shall direct that notice be given to the members affected. (Code 1981, § 14-11-804, enacted by Ga. L. 1993, p. 123, § 1.)

O.C.G.A. § 14-11-805 Dismissal.

14-11-805. Dismissal. (a) The court may dismiss a derivative proceeding if, on motion by the limited liability company, the court finds that one of the groups specified in subsection (b) of this Code section has made a determination in good faith after conducting a reasonable investigation upon which its conclusions are based that the maintenance of the derivative suit is not in the best interests of the limited liability company. The limited liability company shall have the burden of proving the independence and good faith of the group making the determination and the reasonableness of the investigation. (b) The determination in subsection (a) of this Code section shall be made by: (1) A majority vote of the independent managers or members present at a meeting of managers or members, as the case may be, if the independent managers or members constitute a quorum; (2) A majority vote of a committee consisting of two or more independent managers or members appointed by a majority of independent managers or members present at a meeting of managers or members, as the case may be, whether or not such independent managers or members constitute a quorum; or (3) A panel of one or more independent persons appointed by the court upon motion of the limited liability company. (c) None of the following shall by itself cause a manager or member to be considered not independent for purposes of subsection (b) of this Code section: (1) The nomination or election of the manager or member by managers or members who are not independent; (2) The naming of the manager or member as a defendant in the derivative proceeding; or (3) The fact that the manager or member approved the action being challenged in the derivative proceeding so long as the manager or member did not receive a personal benefit as a result of the action. (Code 1981, § 14-11-805, enacted by Ga. L. 1993, p. 123, § 1.)

O.C.G.A. § 14-11-806 Expenses.

14-11-806. Expenses. (a) If a derivative action is successful, in whole or in part, or if anything is received by the plaintiff as a result of a judgment, compromise, or settlement of an action or claim, the court may award the plaintiff reasonable expenses, including reasonable attorneys' fees, and shall direct him or her to remit to the limited liability company the remainder of those proceeds received by him or her. (b) In any derivative action instituted on or after March 1, 1994, in the right of any domestic or foreign limited liability company by a member or members thereof, the court having jurisdiction, upon termination of such action and a finding that the action was commenced or maintained without reasonable cause or for an improper purpose, may order the plaintiff or plaintiffs to pay to the parties named as defendants the reasonable expenses, including reasonable attorneys' fees, incurred by them in the defense of such action. (Code 1981, § 14-11-806, enacted by Ga. L. 1993, p. 123, § 1.)

O.C.G.A. § 14-11-807 Applicability to foreign limited liability companies.

14-11-807. Applicability to foreign limited liability companies. In any derivative action in the right of a foreign limited liability company, the matters covered by this article shall be governed by the laws of the jurisdiction of organization of the foreign limited liability company except for Code Sections 14-11-803 and 14-11-804 and subsection (b) of Code Section 14-11-806. (Code 1981, § 14-11-807, enacted by Ga. L. 1993, p. 123, § 1.) (Amended by Ga. L. 2026, Act 460 (HB 1185), eff. July 1, 2026.)

Source: Official Code of Georgia (Legislative Counsel's copy via Public.Resource.Org) + acts (legis.ga.gov)URL: https://archive.org/download/gov.ga.ocga.2024/T14%20%28V12%29%202017.txtFetched: 10/24/2026