O.C.G.A.

O.C.G.A. § 14-11-801 (2019)

Right of member to bring derivative action

✓ O.C.G.A. — 2019 edition (Public.Resource.Org Release 73)

Code text and O.C.G.A. statutory annotations on this page reflect the 2019 Official Code of Georgia Annotated (Public.Resource.Org Release 73, 2019-08-21; public domain per Georgia v. Public.Resource.Org, 2020). The Syfert case-law annotations in Notes of Decisions, below, are current.

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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.

History

(Code 1981, § 14-11-801, enacted by Ga. L. 1993, p. 123, § 1.)

Annotations

JUDICIAL DECISIONS Standing. - When owners and co-owners of a limited liability company mistakenly signed a deed transferring real estate from the entity that owned it to the company, the owners had standing to

bring a derivative suit on behalf of the entity that had owned the property, seeking its reconveyance, as they satisfied the requirements of O.C.G.A. § 14-11-801, but the owners’ separate company did not

CORPORATIONS & PARTNERSHIPS

have such standing because it had no ownership interest in the company that had owned the property or in the property itself. Ledford v. Smith, 274 Ga. App. 714, 618 S.E.2d 627 (2005). Plaintiff, the debtor’s former business partner, had standing to bring a dischargeability claim because a state court judgment showed a particularized injury caused by the debtor and the claim passed the prudential threshold in that the claim was a specific private action brought pursuant to O.C.G.A. § 14-11-801. Silver v. Edelson (In re Edelson), No. 11-05720-BEM, 2013 Bankr. LEXIS 3909 (Bankr. N.D. Ga. July 3, 2013). Member could not proceed directly. - Court found it inappropriate to allow the member to proceed directly against the managing member for breach of duties under O.C.G.A. § 14-11-305. The member had not established any of the basis that would have allowed the member to pro-

ceed directly against the managing member for any violation of the managing member’s duties to the limited liability company; inter alia, the member did not present any evidence of compliance with O.C.G.A. § 14-11-801. Pollitt v. McClelland (In re McClelland), No. 09-9030-WLH, 2011 Bankr. LEXIS 2224 (Bankr. N.D. Ga. June 8, 2011). Failure to make a formal demand. - Trial court correctly dismissed a derivative action due to the failure to make a formal demand upon the limited liability company, pursuant to O.C.G.A. § 14-11-801, to bring the suit itself, and no futility exception was available. Pinnacle Benning, LLC v. Clark Realty Capital, LLC, 314 Ga. App. 609, 724 S.E.2d 894 (2012). Cited in Internal Med. Alliance, LLC v. Budell, 290 Ga. App. 231, 659 S.E.2d 668 (2008); Practice Benefits, LLC v. Entera Holdings, LLC, 340 Ga. App. 378, 797 S.E.2d 250 (2017).

RESEARCH REFERENCES ALR. - Construction and application of limited liability company acts - issues relating to derivative actions and actions

between members of limited liability company, 48 ALR6th 1.

Notes of Decisions

Cited in 13 cases (5 in the last 5 years), 2005–2026 · leading case: Pinnacle Benning, LLC v. Clark Realty Capital, LLC, 724 S.E.2d 894 (Ga. Ct. App. 2012).

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Pinnacle Benning, LLC v. Clark Realty Capital, LLC, 724 S.E.2d 894 (Ga. Ct. App. 2012). · cites it 12× “OCGA § 14-11-801 provides that a member of a limited-liability corporation may commence a derivative action if five conditions are met, 21 one of which requires the plaintiff to make written demand on the managers or members with authority to cause the limited-liability company…”

Stoker v. Bellemeade, LLC, 615 S.E.2d 1 (Ga. Ct. App. 2005). · cites it 4× “[3] See OCGA § 14-11-801 et seq. (derivative actions under the LLC Act).”

Ledford v. Smith, 618 S.E.2d 627 (Ga. Ct. App. 2005). · cites it 2× “5. Standing. Finally, based on the record before us, it does not appear that the trial court erred in concluding that Ledford, O’Dell, and Walker satisfied the requirements of OCGA§ 14-11-801 and thus have standing to bring a derivative action on behalf of SLC for the…”

Internal Med. All., LLC v. Budell, 659 S.E.2d 668 (Ga. Ct. App. 2008). · cites it 2× “See generally OCGA § 14-11-801 et seq.; Phoenix Airline Svcs.”

Practice Benefits, LLC. v. Entera Holdings, LLC, 797 S.E.2d 250 (Ga. Ct. App. 2017). · cites it 2× “According to Fain, the trial court thus lacked jurisdiction over the subject matter 2 because Practice Benefits did not allege that it had waited 90 days after demanding that Entera’s board of directors take suitable action before filing suit, as required by OCGA §§ 14-11-801…”

A&M Hospitalities, LLC v. Alimchandani, 828 S.E.2d 615 (Ga. Ct. App. 2019). · cites it 2× “The defendants also moved to dismiss the lawsuit for lack of subject matter jurisdiction and due to Alimchandani's alleged failure to satisfy the ante litem requirements of OCGA § 14-11-801. The trial court conducted a hearing on March 28, 2018, to address the parties' various…”

Warbler Investments, LLC v. City of Soc. Circle, 321 Ga. 125 (Ga. 2025). · cites it 2× “”); OCGA § 51-14-9 (a) (requiring that a plaintiff in an asbestos or silica claim be a resident of Georgia “at the time of filing”); OCGA § 14-11-801 (4) (requiring that a plaintiff in an LLC derivative action be a member “at the time of bringing the action”); OCGA § 7-1-441 (a)…”

Charles Paul Walker (Bankr. N.D. Ga. 2022). · cites it 4× “” Simplicity and New Spirit take certain actions pursuant to O.C.G.A. § 14-11-801 et seq.5 [Ex. W9]. In the letter the Peeples stated that they are members or are entitled to be members of Simplicity and New Spirit.”

Evonne Brooks v. Judith Quinlan (Ga. Ct. App. 2020). · cites it 4× “7 See OCGA § 14-11-801, which sets out five preconditions to a member commencing a derivative action in the right of a limited liability company in order to recover a judgment in its favor.”

Monica Patel v. Eager Holdings, LLC (Ga. Ct. App. 2026). · cites it 4× “” OCGA § 14-11-801 (2). In that demand, Monica Patel called upon the managers to “initiate suitable action on behalf of Eager” “for the breach by Craig Franklin and Hetal Patel, aided and abetted by Michelle Franklin of the fiduciary duty to manage the business of Eager in good…”

Ronald Reeser v. Alexander S. Glover, Jr. (Ga. Ct. App. 2025). · cites it 2× “” (Citation and 7 See OCGA § 14-11-801 (4) (setting forth conditions that must be met in order for a member of a limited liability company to commence a derivative action, which include that “[t]he plaintiff (A) is a member of the limited liability company at the time of…”

A & M Hospitalities, LLC v. Prenita Alimchandani (Ga. Ct. App. 2019). · cites it 2× “The defendants also moved to dismiss the lawsuit for lack of subject matter jurisdiction and due to Alimchandani’s alleged failure to satisfy the ante litem requirements of OCGA § 14-11-801. 3 The trial court conducted a hearing on March 28, 2018, to address the parties’ various…”

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