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Article
The Shareholder Derivative Suit in Arkansas
Arkansas Law Review (1999)
  • Mary E Matthews
Abstract

The Arkansas authorities governing derivative claims deviate from the authorities governing direct claims to a greater extent than is necessary. Three statutes govern shareholder derivative suits in Arkansas: the 1965 Arkansas Business Corporation Act (the 1965 ABCA); Arkansas Rule of Civil Procedure 23.1 (Rule 23.1); and the 1987 Arkansas Business Corporation Act (1987 ABCA). While the statutes occasionally conflict with Rule 23.1, the general goal is to prevent “strike suits.” Further, the Arkansas Supreme Court’s interpretation of the authorities suggests conflicts will be resolved in favor of the Rule. These statutes provide procedural restrictions for shareholder derivative suits. There are a number of “shareholder demand requirements” that claimants must meet including a demand’s method, audience, and necessity. Under Rule 23.1, the claim may be challenged if it appears relevant interests are not represented. Questions of contemporaneous ownership and adequacy of representation should arise in motions to strike, dismiss, or grant summary judgment. Venue and jurisdiction must also be properly considered for a claim to succeed. Choosing to file a derivative suit requires filing in chancery rather than circuit court. If a claimant is successful, damages are often awarded to the corporation and in some cases to individual shareholders, though punitive damages are rare. In light of the complexity involved with litigating derivative claims and their distinctions from direct suits, Arkansas courts should reconsider whether these deviations are actually furthering the goals of derivative proceedings.

Keywords
  • Shareholder Derivative Suit,
  • 1965 Arkansas Business Corporation Act,
  • 1965 ABCA,
  • 1987 Arkansas Business Corporation Act,
  • 1987 ABCA,
  • Arkansas Rule of Civil Procedure 23.1,
  • Strike Suits,
  • Shareholder Demand Requirements,
  • Contemporaneous Ownership Requirement,
  • Adequacy of Representation test,
  • Direct Suit
Publication Date
1999
Citation Information
Mary E Matthews. "The Shareholder Derivative Suit in Arkansas" Arkansas Law Review Vol. 52 (1999)
Available at: http://works.bepress.com/mary_matthews/1/