O.C.G.A.
O.C.G.A.

O.C.G.A. § 14-2-740 (2019)

Definitions

✓ 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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As used in this part, the term: (1) ‘‘Derivative proceeding’’ means a civil suit in the right of a domestic corporation or, to the extent provided in Code Section 14-2-747, in the right of a foreign corporation. (2) ‘‘Shareholder’’ includes a beneficial owner whose shares are held in a voting trust or held by a nominee on the owner’s behalf.

History

(Code 1981, § 14-2-740, enacted by Ga. L. 1988, p. 1070, § 1.)

Annotations

Law reviews. - For article, ‘‘The Development of the Shareholder’s Direct Action Damage Remedy,’’ see 28 Ga. St. B. J. 195 (1992). For article, ‘‘Litigation Discov-

ery and Corporate Governance: The Missing Story About the ‘Genius of American Corporate Law,’’’ see 63 Emory L.J. 1383 (2014).

COMMENT Source: Model Act, Part 4 (under consideration, 1987). The proposals of the ABA Committee on Corporate Laws were ultimately published, after further revision, as Changes in the Model Business Corporation Act - Amendments Pertaining to Derivative Proceedings, 44 Bus. Law. 543 (1989).

CORPORATIONS & PARTNERSHIPS

The definition of ‘‘derivative proceeding’’ makes it clear that the part applies to foreign corporations only to the extent provided in Section 14-2-747. Section 14-2-747 provides that the law of the jurisdiction of incorporation governs except for Sections 14-2-743 (stay of proceedings), 14-2-745 (discontinuance or settlement) and 14-2-746 (payment of expenses). See the Comment to Section 14-2-747. The definition of ‘‘shareholder,’’ which applies only to Part 4, includes all beneficial owners and therefore goes beyond the definition in Section 14-2-140, which includes only recordholders and beneficial owners who are certified by a nominee pursuant to the procedure specified in Section 14-2-723. In the context of Part 4, beneficial owner means a person having a direct economic interest in the shares. The definition is not intended to adopt the broad definition of beneficial ownership in SEC Rule 13d-2 under the Securities Exchange Act of 1934 which includes persons with the right to vote or dispose of the shares even though they have no economic interest in them. Similar definitions are found in Section 14-2-1301 (dissenters’ rights) and Section 14-2-1602(g) (inspection of records by a shareholder). Subsection (2) defines ‘‘shareholder’’ so that the plaintiff may be either a registered or beneficial owner of shares held by a nominee in his behalf. Former Georgia law required derivative actions to be brought by a ‘‘shareholder of record,’’ in § 14-2-123(b). This limiting requirement was dropped in light of the widespread use of street name or nominee ownership of shares. Subsection (2) expands the right to bring derivative actions to include voting trust certificate holders, who could not formerly bring such actions in Georgia. Former § 14-2-123(b)(3) only permitted former voting trust certificate holders to sue, if they were certificate holders at the time of the alleged wrong; but they must be holders of record in order to bring suit. Cross-References Beneficial owner treated as record owner, see § 14-2-723. ‘‘Domestic corporation’’ defined, see § 14-2-140. ‘‘Foreign corporation’’ defined, see § 14-2-140. ‘‘Proceeding’’ defined, see § 14-2-140. ‘‘Shareholder’’ defined, see § 14-2-140. Voting trusts, see § 14-2-730. RESEARCH REFERENCES Am. Jur. 2d. - 19 Am. Jur. 2d, Corporations, § 1932 et seq. C.J.S. - 18 C.J.S., Corporations, §§ 372, 373, 482 et seq. ALR. - Causation in private civil actions by minority shareholders under

proxy provisions of § 14 (a) of the Securities Exchange Act of 1934 (15 USCS § 78n (a)) and Securities Exchange Act (SEC) Rules thereunder - Post Virginia bankshares, 137 ALR Fed 293.

Notes of Decisions
Cited in 6 cases, 1991–2020 · leading case: Barnett v. Fullard, 701 S.E.2d 608 (Ga. Ct. App. 2010).
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Barnett v. Fullard, 701 S.E.2d 608 (Ga. Ct. App. 2010). · cites it 2× “See also OCGA § 14-2-740 et seq. Because such an action seeks to redress a wrong sustained by the corporation rather than the individual plaintiff, “[i]t has long been recognized .”
Ronald O. Pelletier v. Gary D. Zweifel, Ronald O. Pelletier v. Gary D. Zweifel, 921 F.2d 1465 (11th Cir. 1991). “Bassett and Schlanger testified that they believed that the Hursts, as House of Travel directors, had to be named as parties defendant in order for Pelletier and Langston to obtain relief (on behalf of House of Travel) on their shareholders' derivative claim against Culpepper.”
Stricker v. Epstein, 444 S.E.2d 91 (Ga. Ct. App. 1994). · cites it 2× “772 ( 301 SE2d 49 ) (1983); OCGA § 14-2-740 et seq. Plaintiffs argue that Epstein and Feinberg owed them fiduciary duties not only as officers, directors and majority shareholders, but also as the holders of plaintiffs’ voting rights pursuant to the stockholder agreements.”
Carter v. Murphey, 567 S.E.2d 326 (Ga. Ct. App. 2002). · cites it 2× “It further alleged that he was the developer of a subdivision owned by Furey and that the Carters were 50 percent shareholders in Furey, to whom he owed fiduciary duties.”
Terilyn Callicott v. Paul Scott (Ga. Ct. App. 2020). · cites it 2× “See also OCGA § 14-2-740 et seq. Because such an action seeks to redress a wrong sustained by the corporation rather than the individual plaintiff, “[i]t has long been recognized .”
LR Trust ex rel. SunTrust Banks, Inc. v. Rogers, 270 F. Supp. 3d 1364 (N.D. Ga. 2017). “' § 14-2-740. . "SunTrust is a Georgia-based bank holding ' ’company, operating banking centers across the Southeastern Mid-Atlantic region of the United States.”
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