The Vermont Statutes Online

Title 11A: Vermont Business Corporations

Chapter 007: Shareholders

• Subchapter 001: MEETINGS

• § 7.01. Annual meeting

  Annual shareholders’ meetings shall be held in this State, unless permitted in the bylaws of the corporation to be held outside this State. Annual meetings shall be held at the place stated in or fixed in accordance with the bylaws. If no place is stated in or fixed in accordance with the bylaws, annual meetings shall be held at the corporation’s principal office. An annual meeting may be conducted by means of any electronic or telecommunications mechanism, including video-conference telecommunication. The failure to hold an annual meeting at the time stated or fixed in accordance with a corporation’s bylaws does not affect the validity of any corporate action. (Added 1993, No. 85, § 2, eff. Jan. 1, 1994; amended 2007, No. 190 (Adj. Sess.), § 88, eff. June 6, 2008.)

• § 7.02. Special meetings

  (a) A corporation shall hold a special meeting of shareholders:

  (1) on call of its board of directors or the person or persons authorized to do so by the articles of incorporation or bylaws; or

  (2) if the holders of at least ten percent of all the votes entitled to be cast on any issue proposed to be considered at the proposed special meeting sign, date, and deliver to the corporation’s secretary one or more written demands for the meeting describing the purpose or purposes for which it is to be held.

  (b) If not otherwise fixed under section 7.03 or 7.07 of this title, the record date for determining shareholders entitled to demand a special meeting is the date the first shareholder signs the demand.

  (c) Special shareholders’ meetings shall be held in this State, unless permitted in the bylaws of the corporation to be held outside this State. Meetings shall be held at the place stated in or fixed in accordance with the bylaws. If no place is stated in or fixed in accordance with the bylaws, annual meetings shall be held at the corporation’s principal office. A special meeting may be conducted by means of any electronic or telecommunications mechanism, including video-conference telecommunication.

  (d) Only business within the purpose or purposes described in the meeting notice required by subsection 7.05(c) of this title may be conducted at a special shareholders’ meeting. (Added 1993, No. 85, § 2, eff. Jan. 1, 1994; amended 2007, No. 190 (Adj. Sess.), § 89, eff. June 6, 2008.)

• § 7.03. Court-ordered meeting

  (a) The Superior Court of the county where a corporation’s principal office (or, if none in this State, its registered office) is located may summarily order a meeting to be held:

  (1) on application of any shareholder of the corporation entitled to participate in an annual meeting if an annual meeting was not held within the earlier of six months after the end of the corporation’s fiscal year or 15 months after its last annual meeting; or

  (2) on application of a shareholder who signed a demand for a special meeting valid under section 7.02 of this title, if:

  (A) notice of the special meeting was not given within 30 days after the date the demand was delivered to the corporation’s secretary; or

  (B) the special meeting was not held in accordance with the notice.

  (b) The Court may fix the time and place of meeting, determine the shares entitled to participate in the meeting, specify a record date for determining shareholders entitled to notice of and to vote at the meeting, prescribe the form and content of the meeting notice, fix the quorum required for specific matters to be considered at the meeting (or direct that the votes represented at the meeting constitute a quorum for action on those matters), and enter other orders necessary to accomplish the purpose or purposes of the meeting. (Added 1993, No. 85, § 2, eff. Jan. 1, 1994.)

• § 7.04. Action without meeting

  (a) Unless the articles of incorporation preclude the taking of action required or permitted by this title without a shareholders’ meeting, action required or permitted by this title to be taken at a shareholders’ meeting may be taken without a meeting if the action is taken by all the shareholders entitled to vote on the action. Each action must be evidenced by one or more written consents describing the action taken, signed by all the shareholders entitled to vote on the action, and delivered to the corporation for inclusion in the minutes or filed with the corporate records. For purposes of this section, consent evidenced by electronic communications or an electronic record is written consent.

  (b) If the articles of incorporation contain specific authority to do so, action required or permitted by this title to be taken at a shareholders’ meeting may be taken without a meeting if the action is taken by the holders of at least a majority of all of the shares entitled to vote on the action, and if each shareholder is given prior notice of the action proposed to be taken. Each action must be evidenced by one or more written consents describing the action taken, signed by the holders of at least a majority of all the shares and delivered to the corporation for inclusion in the minutes or filed with the corporate records. Prompt notice of any action taken by less than unanimous written consent in lieu of a meeting shall be given to all shareholders entitled to vote on such action under this title.

  (c) If not otherwise fixed under section 7.03 or 7.07 of this title, the record date for determining shareholders entitled to take action without a meeting is the date the first shareholder signs the consent under subsection (a) of this section.

  (d) A consent signed under this section has the effect of a meeting vote and may be described as such in any document. (Added 1993, No. 85, § 2, eff. Jan. 1, 1994; amended 2007, No. 190 (Adj. Sess.), § 90, eff. June 6, 2008.)

• § 7.05. Notice of meeting

  (a) A corporation shall notify shareholders of the date, time, and place of each annual and special shareholders’ meeting no fewer than ten nor more than 60 days before the meeting date. Unless this title or the articles of incorporation require otherwise, the corporation is required to give notice only to shareholders entitled to vote at the meeting.

  (b) Unless this title or the articles of incorporation require otherwise, notice of an annual meeting need not include a description of the purpose or purposes for which the meeting is called.

  (c) Notice of a special meeting must include a description of the purpose or purposes for which the meeting is called.

  (d) If not otherwise fixed under section 7.03 or 7.07 of this title, the record date for determining shareholders entitled to notice of and to vote at an annual or special shareholders’ meeting is close of business on the day before the first notice is delivered to shareholders.

  (e) Unless the bylaws require otherwise, if an annual or special shareholders’ meeting is adjourned to a different date, time, or place, notice need not be given of the new date, time, or place if the new date, time, or place is announced at the meeting before adjournment. If a new record date for the adjourned meeting is or must be fixed under section 7.07 of this title, however, notice of the adjourned meeting must be given under this section to persons who are shareholders as of the new record date. (Added 1993, No. 85, § 2, eff. Jan. 1, 1994.)

• § 7.06. Waiver of notice

  (a) A shareholder may waive any notice required by this title, the articles of incorporation, or bylaws before or after the date and time stated in the notice. The waiver must be in writing, be signed by the shareholder entitled to the notice, and be delivered to the corporation for inclusion in the minutes or filing with the corporate records.

  (b) A shareholder’s attendance at a meeting:

  (1) waives objection to lack of notice or defective notice of the meeting, unless the shareholder makes timely objection to holding the meeting or transacting business at the meeting;

  (2) waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder makes timely objection to considering the matter when it is presented, or when the shareholder thereafter becomes aware that the matter has been presented.

  (c) An objection made under subsection (b) of this section preserves the right of the shareholder to file a judicial action to challenge the validity of the meeting, transaction, or other matter under consideration. (Added 1993, No. 85, § 2, eff. Jan. 1, 1994.)

• § 7.07. Record date

  (a) The bylaws may fix or provide the manner of fixing the record date for one or more voting groups in order to determine the shareholders entitled to notice of a shareholders’ meeting, to demand a special meeting, to vote, or to take any other action. If the bylaws do not fix or provide for fixing a record date, the board of directors of the corporation may fix a future date as the record date.

  (b) A record date fixed under this section may not be less than 10 nor more than 70 days before the meeting or action requiring a determination of shareholders.

  (c) A determination of shareholders entitled to notice of or to vote at a shareholders’ meeting is effective for any adjournment of the meeting unless the board of directors fixes a new record date, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.

  (d) If a court orders a meeting adjourned to a date more than 120 days after the date fixed for the original meeting, it may provide that the original record date continues in effect or it may fix a new record date. (Added 1993, No. 85, § 2, eff. Jan. 1, 1994.)

• Subchapter 002: VOTING

• § 7.20. Shareholders’ list for meeting

  (a) After fixing a record date for a meeting, a corporation shall prepare an alphabetical list of the names of all its shareholders who are entitled to notice of a shareholders’ meeting. The list must be arranged by voting group (and within each voting group by class or series of shares) and show the address of and number of shares held by each shareholder.

  (b) The shareholders’ list must be made available for inspection by any shareholder, beginning two business days after notice of the meeting is given for which the list was prepared and continuing through the meeting, at the corporation’s principal office or at a place identified in the meeting notice in the city where the meeting will be held. A shareholder of record and entitled to vote at that meeting, his or her agent, or attorney is entitled on written demand to inspect and, subject to the requirements of subsection 16.02(c) of this title, to copy the list, during regular business hours and at his or her expense, during the period it is available for inspection.

  (c) The corporation shall make the shareholders’ list available at the meeting, and any shareholder of record and entitled to vote at that meeting, his or her agent, or attorney is entitled to inspect the list at any time during the meeting or at any adjournment.

  (d) If the corporation refuses to allow a shareholder of record and entitled to vote at that meeting, his or her agent, or attorney to inspect the shareholders’ list before or at the meeting (or copy the list as permitted by subsection (b) of this section), the superior court of a county where a corporation’s principal office (or if none in this State, its registered office) is located, on application of the shareholder, may summarily order the inspection or copying at the corporation’s expense and may postpone the meeting for which the list was prepared until the inspection or copying is complete.

  (e) Refusal or failure to prepare or make available the shareholders’ list does not affect the validity of action taken at the meeting, unless a shareholder, or his or her agent or attorney objects on the record or in writing to such refusal or failure prior to such action having been taken. In the event of such refusal or failure, and such objection, the action taken at the meeting shall be negated unless:

  (1) the meeting is recessed for a period of not less than five days after the list is made available to the objecting party; or

  (2) the corporation petitions and the superior court declares that the corporation’s refusal or failure is in accordance with the law. (Added 1993, No. 85, § 2, eff. Jan. 1, 1994.)

• § 7.21. Voting entitlement of shares

  (a) Except as provided in subsections (b) and (c) of this section or unless the articles of incorporation provide otherwise, each outstanding share, regardless of class, is entitled to one vote on each matter voted on at a shareholders’ meeting. Only shares are entitled to vote.

  (b) Absent special circumstances, the shares of a corporation are not entitled to vote if they are owned, directly or indirectly, by a second corporation, domestic or foreign, and the first corporation owns, directly or indirectly, a majority of the shares entitled to vote for directors of the second corporation.

  (c) Subsection (b) of this section shall not limit the power of a corporation to vote any shares, including its own shares, held by it in a fiduciary capacity.

  (d) Redeemable shares are not entitled to vote after notice of redemption is mailed to the holders and a sum sufficient to redeem the shares has been deposited with a bank, trust company, or other financial institution under an irrevocable obligation to pay the holders the redemption price on surrender of the shares. (Added 1993, No. 85, § 2, eff. Jan. 1, 1994.)

• § 7.22. Proxies

  (a) A shareholder may vote his or her shares in person or by proxy.

  (b) A shareholder may appoint a proxy to vote or otherwise act for him or her by:

  (1) signing an appointment form, either personally or by his or her attorney-in-fact; or

  (2) by transmitting to the corporation or the corporation’s duly authorized agent an appointment of a proxy by electronic transmission, including telephone or e-mail.

  (c) An appointment of a proxy is effective when received by the secretary or other officer or agent authorized to tabulate votes. An appointment is valid for 11 months unless a longer period is expressly provided in the appointment form.

  (d) An appointment of a proxy is revocable by the shareholder unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest. Appointments coupled with an interest include the appointment of:

  (1) a pledgee;

  (2) a person who purchased or agreed to purchase the shares;

  (3) a creditor of the corporation who extended it credit under terms requiring the appointment;

  (4) an employee of the corporation whose employment contract requires the appointment; or

  (5) a party to a voting agreement created under section 7.31 or 20.12 of this title.

  (e) The death or incapacity of the shareholder appointing a proxy does not affect the right of the corporation to accept the proxy’s authority unless notice of the death or incapacity is received by the secretary or other officer or agent authorized to tabulate votes before the proxy exercises his or her authority under the appointment.

  (f) An appointment made irrevocable under subsection (d) of this section is revoked when the interest with which it is coupled is extinguished.

  (g) A transferee for value of shares subject to an irrevocable appointment may revoke the appointment if he or she did not know of its existence when he or she acquired the shares and the existence of the irrevocable appointment was not noted conspicuously on the certificate representing the shares or on the information statement for shares without certificates.

  (h) Subject to section 7.24 of this title and to any express limitation on the proxy’s authority appearing on the face of the appointment form, a corporation is entitled to accept the proxy’s vote or other action as that of the shareholder making the appointment. (Added 1993, No. 85, § 2, eff. Jan. 1, 1994; amended 2001, No. 26, § 1.)

• § 7.23. Shares held by nominees

  (a) A corporation may establish a procedure by which the beneficial owner of shares that are registered in the name of a nominee is recognized by the corporation as the shareholder. The extent of this recognition may be determined in the procedure.

  (b) The procedure may set forth:

  (1) the types of nominees to which it applies;

  (2) the rights or privileges that the corporation recognizes in a beneficial owner;

  (3) the manner in which the procedure is selected by the nominee;

  (4) the information that must be provided when the procedure is selected;

  (5) the period for which selection of the procedure is effective; and

  (6) other aspects of the rights and duties created. (Added 1993, No. 85, § 2, eff. Jan. 1, 1994.)

• § 7.24. Corporation’s acceptance of votes

  (a) If the name signed or delivered by electronic transmission on a vote consent, waiver, or proxy appointment corresponds to the name of a shareholder, the corporation, if acting in good faith, is entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the shareholder.

  (b) If the name signed or delivered by electronic transmission on a vote, consent, waiver, or proxy appointment does not correspond to the name of its shareholder, the corporation, if acting in good faith, is nevertheless entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the shareholder if:

  (1) the shareholder is an entity and the name signed or delivered by electronic transmission purports to be that of an officer or agent of the entity;

  (2) the name signed or delivered by electronic transmission purports to be that of an administrator, executor, guardian, or conservator representing the shareholder and, if the corporation requests, evidence of fiduciary status acceptable to the corporation has been presented with respect to the vote, consent, waiver, or proxy appointment;

  (3) the name signed or delivered by electronic transmission purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the corporation requests, evidence of this status acceptable to the corporation has been presented with respect to the vote, consent, waiver, or proxy appointment;

  (4) the name signed or delivered by electronic transmission purports to be that of a pledgee, beneficial owner, or attorney-in-fact of the shareholder and, if the corporation requests, evidence acceptable to the corporation of the signatory’s authority to sign or deliver by electronic transmission for the shareholder has been presented with respect to the vote, consent, waiver, or proxy appointment;

  (5) two or more persons are the shareholder as co-tenants or fiduciaries and the name signed or delivered by electronic transmission purports to be the name of at least one of the co-owners and the person signing or delivering by electronic transmission appears to be acting on behalf of all the co-owners.

  (c) The corporation is entitled to reject a vote, consent, waiver, or proxy appointment if the secretary or other officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of:

  (1) the signature on it;

  (2) the signatory’s authority to sign for the shareholder; or

  (3) the electronic transmission by which the proxy appointment was made.

  (d) The corporation and its officer or agent who accepts or rejects a vote, consent, waiver, or proxy appointment in good faith and in accordance with the standards of this section are not liable in damages to the shareholder for the consequences of the acceptance or rejection.

  (e) Corporate action based on the acceptance or rejection of a vote, consent, waiver, or proxy appointment under this section is valid unless a court of competent jurisdiction determines otherwise. (Added 1993, No. 85, § 2, eff. Jan. 1, 1994; amended 2001, No. 26, § 2.)

• § 7.25. Quorum and voting requirements for voting groups

  (a) Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. Unless the articles of incorporation or this title provide for a greater quorum, a majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter.

  (b) Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting.

  (c) If a quorum exists, action on a matter (other than the election of directors) by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the articles of incorporation or this title require a greater number of affirmative votes.

  (d) An amendment of the articles of incorporation adding, changing, or deleting a greater quorum or voting requirement for a voting group greater than specified in subsection (a) or (c) of this section is governed by section 7.27 of this title.

  (e) The election of directors is governed by section 7.28 of this title. (Added 1993, No. 85, § 2, eff. Jan. 1, 1994.)

• § 7.26. Action by single and multiple voting groups

  (a) If the articles of incorporation or this title provide for voting by a single voting group on a matter, action on that matter is taken when voted upon by that voting group as provided in section 7.25 of this title.

  (b) If the articles of incorporation or this title provide for voting by two or more voting groups on a matter, action on that matter is taken only when voted upon by each of those voting groups counted separately as provided in section 7.25 of this title. Action may be taken by one voting group on a matter even though no action is taken by another voting group entitled to vote on the matter. (Added 1993, No. 85, § 2, eff. Jan. 1, 1994.)

• § 7.27. Greater quorum or voting requirements

  (a) The articles of incorporation may provide for a greater quorum or voting requirement for shareholders (or voting groups of shareholders) than is provided for by this title.

  (b) An amendment to the articles of incorporation that adds, changes, or deletes a greater quorum or voting requirement must meet the same quorum requirement and be adopted by the same vote and voting groups required to take action under the quorum and voting requirements then in effect or proposed to be adopted, whichever is greater. (Added 1993, No. 85, § 2, eff. Jan. 1, 1994.)

• § 7.28. Voting for directors; cumulative voting

  (a) Unless otherwise provided in the articles of incorporation, directors are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present.

  (b) Shareholders do not have a right to cumulate their votes for directors unless the articles of incorporation so provide.

  (c) A statement included in the articles of incorporation that “(all) (a designated voting group of) shareholders are entitled to cumulate their votes for directors” (or words of similar import) means that the shareholders designated are entitled to multiply the number of votes they are entitled to cast by the number of directors for whom they are entitled to vote and cast the product for a single candidate or distribute the product among two or more candidates.

  (d) Shares otherwise entitled to vote cumulatively may not be voted cumulatively at a particular meeting unless:

  (1) the meeting notice or proxy statement accompanying the notice states conspicuously that cumulative voting is authorized; or

  (2) a shareholder who has the right to cumulate his or her votes gives notice to the corporation not less than 48 hours before the time set for the meeting of his or her intent to cumulate his or her votes during the meeting, and if one shareholder gives this notice all other shareholders in the same voting group participating in the election are entitled to cumulate their votes without giving further notice. (Added 1993, No. 85, § 2, eff. Jan. 1, 1994.)

• Subchapter 003: VOTING TRUSTS AND AGREEMENTS

• § 7.30. Voting trusts

  (a) One or more shareholders may create a voting trust, conferring on a trustee the right to vote or otherwise act for them, by signing an agreement setting out the provisions of the trust (which may include anything consistent with its purpose) and transferring their shares to the trustee. When a voting trust agreement is signed, the trustee shall prepare a list of the names and addresses of all owners of beneficial interests in the trust, together with the number and class of shares each transferred to the trust, and deliver copies of the list and agreement to the corporation’s principal office.

  (b) A voting trust becomes effective on the date the first shares subject to the trust are registered in the trustee’s name. A voting trust is valid for not more than 10 years after its effective date unless extended under subsection (c) of this section.

  (c) All or some of the parties to a voting trust may extend it for additional terms of not more than 10 years each by signing an extension agreement and obtaining the voting trustee’s written consent to the extension. An extension is valid for 10 years from the date the first shareholder signs the extension agreement. The voting trustee must deliver copies of the extension agreement and list of beneficial owners to the corporation’s principal office. An extension agreement binds only those parties signing it. (Added 1993, No. 85, § 2, eff. Jan. 1, 1994.)

• § 7.31. Voting agreements

  (a) Two or more shareholders may provide for the manner in which they will vote their shares by signing an agreement for that purpose. A voting agreement created under this section is not subject to the provisions of section 7.30 of this title.

  (b) A voting agreement created under this section is specifically enforceable. (Added 1993, No. 85, § 2, eff. Jan. 1, 1994.)

• § 7.32. Shareholder agreements

  (a) An agreement among the shareholders of a corporation that complies with this section is effective among the shareholders and the corporation even though it is inconsistent with one or more other provisions of this title in that it:

  (1) eliminates the board of directors or restricts the discretion or powers of the board of directors;

  (2) governs the authorization or making of distributions whether or not in proportion to ownership of shares, subject to the limitations in section 6.40 of this title;

  (3) establishes who shall be directors or officers of the corporation, or their terms of office or manner of selection or removal;

  (4) governs, in general or in regard to specific matters, the exercise or division of voting power by or between the shareholders and directors or by or among any of them, including the use of weighted voting rights or director proxies;

  (5) establishes the terms and conditions of any agreement for the transfer or use of property or the provision of services between the corporation and any shareholder, director, officer, or employee of the corporation or among any of them;

  (6) transfers to one or more shareholders or other persons all or part of the authority to exercise the corporate powers or to manage the business and affairs of the corporation, including the resolution of any issue about which there exists a deadlock among directors or shareholders;

  (7) requires dissolution of the corporation at the request of one or more of the shareholders or upon the occurrence of a specified event; or

  (8) otherwise governs the exercise of the corporate powers or the management of the business and affairs of the corporation or the relationship among the shareholders, the directors, and the corporation, or among any of them, and is not contrary to public policy.

  (b) An agreement authorized by this section shall be:

  (1) set forth:

  (A) in the articles of incorporation or bylaws and approved by all persons who are shareholders at the time of the agreement; or

  (B) in a written agreement that is signed by all persons who are shareholders at the time of the agreement and is made known to the corporation;

  (2) subject to amendment only by the holders of a majority of each class of the corporation’s issued and outstanding capital stock, with each class voting as a separate group, unless the agreement provides otherwise; and

  (3) valid for 10 years, unless the agreement provides otherwise.

  (c) The existence of an agreement authorized by this section shall be noted conspicuously on the front or back of each certificate for outstanding shares or on the information statement required by subsection 6.26(b) of this title. If at the time of the agreement the corporation has shares outstanding represented by certificates, the corporation shall recall the outstanding certificates and issue substitute certificates that comply with this subsection. The failure to note the existence of the agreement on the certificate or information statement shall not affect the validity of the agreement or any action taken pursuant to it. Any purchaser of shares who, at the time of purchase, did not have knowledge of the existence of the agreement shall be entitled to rescission of the purchase. A purchaser shall be deemed to have knowledge of the existence of the agreement if its existence is noted on the certificate or information statement for the shares in compliance with this subsection and, if the shares are not represented by a certificate, the information statement is delivered to the purchaser at or prior to the time of the purchase of the shares. An action to enforce the right of rescission authorized by this subsection must be commenced within the earlier of 90 days after discovery of the existence of the agreement or two years after the time of the purchase of the shares.

  (d) An agreement authorized by this section shall cease to be effective when the corporation becomes a public corporation. If the agreement ceases to be effective for any reason, the board of directors may, if the agreement is contained or referred to in the corporation’s articles of incorporation or bylaws, adopt an amendment to the articles of incorporation or bylaws, without shareholder action, to delete the agreement and any references to it.

  (e) An agreement authorized by this section that limits the discretion or powers of the board of directors shall relieve the directors of, and impose upon the person or persons in whom such discretion or powers are vested, liability for acts or omissions imposed by law on directors to the extent that the discretion or powers of the directors are limited by the agreement.

  (f) The existence or performance of an agreement authorized by this section shall not be a ground for imposing personal liability on any shareholder for the acts or debts of the corporation, even if the agreement or its performance treats the corporation as if it were a partnership or results in failure to observe the corporate formalities otherwise applicable to the matters governed by the agreement.

  (g) Incorporators or subscribers for shares may act as shareholders with respect to an agreement authorized by this section if no shares have been issued when the agreement is made. (Added 2007, No. 190 (Adj. Sess.), § 91, eff. June 6, 2008.)

• Subchapter 004: DERIVATIVE PROCEEDINGS

• § 7.40. Procedure in derivative proceedings

  (a) A person may not commence a proceeding in the right of a domestic or foreign corporation unless such person was a shareholder of the corporation when the transaction complained of occurred or unless such person became a shareholder through transfer by operation of law from one who was a shareholder at that time.

  (b) A complaint in a proceeding brought in the right of a corporation must be verified and allege with particularity the demand made, if any, to obtain action by the board of directors and either that the demand was refused or ignored or why he or she did not make the demand. Whether or not a demand for action was made, if the corporation commences an investigation of the charges made in the demand or complaint, the court may stay any proceeding until the investigation is completed.

  (c) A proceeding commenced under this section 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 interest of the corporation’s shareholders or a class of shareholders, the court shall direct that notice be given the shareholders affected.

  (d) For purposes of this section, “shareholder” includes a beneficial owner whose shares are held in a voting trust or held by a nominee on the shareholder’s behalf. (Added 1993, No. 85, § 2, eff. Jan. 1, 1994.)