Rule 23.1.Derivative Actions

Last amended December 1, 2007 · Last verified June 30, 2026

In one sentenceRule 23.1 sets the rules for a shareholder derivative action brought to enforce a corporation’s right: the complaint must be verified, show the plaintiff’s standing, and state any demand on the directors or why demand was excused, and any settlement needs court approval.

Full Text of Rule 23.1

Text sizeJump to: (a) (b) (c)

(a) Prerequisites. This rule applies when one or more shareholders or members of a corporation or an unincorporated association bring a derivative action to enforce a right that the corporation or association may properly assert but has failed to enforce. The derivative action may not be maintained if it appears that the plaintiff does not fairly and adequately represent the interests of shareholders or members who are similarly situated in enforcing the right of the corporation or association.

(b) Pleading Requirements. The complaint must be verified and must:

(1) allege that the plaintiff was a shareholder or member at the time of the transaction complained of, or that the plaintiff's share or membership later devolved on it by operation of law;

(2) allege that the action is not a collusive one to confer jurisdiction that the court would otherwise lack; and

(3) state with particularity:

(A) any effort by the plaintiff to obtain the desired action from the directors or comparable authority and, if necessary, from the shareholders or members; and

(B) the reasons for not obtaining the action or not making the effort.

(c) Settlement, Dismissal, and Compromise. A derivative action may be settled, voluntarily dismissed, or compromised only with the court's approval. Notice of a proposed settlement, voluntary dismissal, or compromise must be given to shareholders or members in the manner that the court orders.

End

Amendment History

(Adopted February 28, 1966, effective July 1, 1966; amended March 2, 1987, effective August 1, 1987; April 30, 2007, effective December 1, 2007.)

Plain-English Summary

A derivative action is a suit by a shareholder or member that asserts the corporation’s right, usually against insiders the company itself will not sue. Because the plaintiff is standing in the company’s shoes, Rule 23.1 adds safeguards. The complaint must be verified, and it must show that the plaintiff was a shareholder or member at the time of the challenged transaction and that the action is not a collusive attempt to manufacture federal jurisdiction.

Critically, the complaint must state with particularity any effort the plaintiff made to get the directors (and, if necessary, the shareholders) to pursue the claim, or the reasons for not making that effort — the demand requirement. A derivative action may be settled, voluntarily dismissed, or compromised only with the court’s approval, with notice to affected shareholders as the court orders.

Frequently Asked Questions

What is a shareholder derivative action?

A suit in which a shareholder enforces a right belonging to the corporation, typically because the company itself will not bring the claim (Rule 23.1).

What is the demand requirement?

Rule 23.1 requires the complaint to state with particularity the plaintiff’s effort to get the directors to act on the claim, or the reasons why such a demand was excused.

Source & verification. The rule text and amendment history are reproduced verbatim from the official Federal Rules of Civil Procedure (Fed. R. Civ. P. 23.1), a public-domain work of the U.S. Government. Prescribed by the United States Supreme Court under the Rules Enabling Act. The plain-English summary is original and written by us. Last verified June 30, 2026. · Official source

Also known as: FRCP 23.1Fed. R. Civ. P. 23.1derivative actionshareholder derivative suitdemand requirement