O.C.G.A.

O.C.G.A. § 14-3-740 (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 14-3-747, in the right of a foreign corporation.

(2) ‘‘Member’’ includes those who are members under Code Section 14-3-140, as well as any person who is entitled to some portion of the corporation’s property upon dissolution, and any person or class of persons specifically designated in the corporation’s bylaws or articles of incorporation as having standing to bring a derivative proceeding.

History

(Code 1981, § 14-3-740, enacted by Ga. L. 1991, p. 465, § 1.)

Annotations

COMMENT Part 4 of article 7 of the Code is based on the Model Act and on its counterpart in the Business Code. Prior law did not address the issue of derivative actions involving nonprofit corporations. The Model Act, which was approved prior to amendments to the Revised Model Business Corporation Act concerning derivative actions, contains a single section authorizing derivative actions. This part adopts the approach taken by the Revised Model Business Corporation Act and by the Business Code, with refinements to reflect the different constituencies. ‘‘Member’’ is specially defined for purposes of this part to include persons whose special interest in the corporation should give them standing to bring a derivative proceeding. Those persons include anyone entitled to some portion of the corporation’s property upon dissolution and anyone specifically designated in the corporation’s articles or bylaws as having standing to bring a derivative proceeding. Remote contingent interests in a corporation’s property are insufficient to qualify a person as a ‘‘member’’ for purposes of this part.

Notes of Decisions

Cited in 8 cases (4 in the last 5 years), 1997–2024 · leading case: Dunn v. Ceccarelli, 489 S.E.2d 563 (Ga. Ct. App. 1997).

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Dunn v. Ceccarelli, 489 S.E.2d 563 (Ga. Ct. App. 1997). · cites it 2× “A97A0152, in their first enumeration of error, Dunn and Bigley claim that the action was a derivative one, as defined in OCGA § 14-3-740 (1) of the Georgia Nonprofit Corporation Code: “ ‘Derivative proceeding’ means a civil suit in the right of a domestic corporation.”

Dunn v. Ceccarelli, 521 S.E.2d 237 (Ga. Ct. App. 1999). · cites it 2× “1 At trial, defendants sought dismissal of appellees’ complaint for failure to follow the pre-suit demand requirements set out in the Non-Profit Corporation Code, OCGA § 14-3-740 et seq., erroneously styling their motion as a motion for summary judgment.”

Ga. Appreciation Prop., Inc. v. Enclave at Riverwalk Townhome Ass'n, Inc., 812 S.E.2d 157 (5th Cir. 2018). · cites it 2× “Enclave was organized as a Georgia non-profit corporation pursuant to the Georgia Nonprofit Corporation Code. See OCGA § 14-3-101 et seq.”

Jennifer Knaack v. Henley Park Homeowners Ass'n, Inc. (Ga. Ct. App. 2022). · cites it 4× “During oral argument, the Association also argued that, to the extent that Knaack claimed that the new Community Rules constituted an unauthorized amendment to the Declaration, she lacked standing because such a claim must be brought as a derivative action on behalf of the 5…”

Casey Murray v. Lexington Park of Fulton Cnty. Cmty. Ass'n, Inc. (Ga. Ct. App. 2024). · cites it 4× “272 , 274-275 (1) ( 855 SE2d 35 ) (2021); OCGA §§ 14-3-740 & 14-3-741. “In a nonprofit derivative suit, a member asserts for the corporation’s benefit rights or remedies belonging to the corporation, not to the member.”

Georgia Appreciation Prop., Inc. v. Enclave at Riverwalk Townhome Ass'n, Inc. (Ga. Ct. App. 2018). · cites it 4× “See OCGA § 14-3-101 et seq.; see also OCGA § 44-3-227 (a).”

North Walhalla Props., LLC v. Kennestone Gates Condo. Ass'n, Inc. (Ga. Ct. App. 2021). · cites it 2× “In related enumerations of error, Walhalla asserts that the trial court erred by concluding that it could not recover against the defendants based upon its lack of standing.”

Carla Willis v. Water's Edge Homeowner's Ass'n, Inc. (Ga. Ct. App. 2023). · cites it 2× “See OCGA § 14-3-740 et seq. But after permitting the members to add additional plaintiffs to satisfy OCGA § 14-3-741 (a) (3), which permits a derivative proceeding to be brought by a group of 50 or more members of a corporation, the trial court denied the association’s motion as…”

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