Rule 1-023.1.Derivative actions by shareholders

Last amended July 1, 1995 · Last verified June 26, 2026

In one sentenceRule 1-023.1 governs shareholder or member derivative actions, requiring a verified complaint that pleads standing and the demand made on the directors, and court approval of any dismissal.

Full Text of Rule 1-023.1

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In a derivative action brought by one or more shareholders or members to enforce a right of a corporation or of an unincorporated association, the corporation or association having failed to enforce a right which may properly be asserted by it, the complaint shall be verified and shall allege that the plaintiff was a shareholder or member at the time of the transaction of which the plaintiff complains or that the plaintiff's share or membership thereafter devolved on the plaintiff by operation of law. The complaint shall also allege with particularity the efforts, if any, made by the plaintiff to obtain the action the plaintiff desires from the directors or comparable authority and, if necessary, from the shareholders or members, and the reasons for the plaintiff's failure to obtain the action or for not making the effort. The derivative action may not be maintained if it appears that the plaintiff does not fairly and adequately represent the interests of the shareholders or members similarly situated in enforcing the right of the corporation or association. The action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to shareholders or members in such manner as the court directs.

End

Rule History

[As amended, effective July 1, 1995.]

Plain-English Summary

This rule sets the gate for derivative suits—cases a shareholder or member brings to enforce a right the corporation or association failed to pursue. The complaint must be verified and must allege that the plaintiff held shares or membership at the time of the challenged transaction (or acquired them by operation of law), and it must plead with particularity the efforts to get the directors—and, if necessary, the shareholders—to act, or the reasons for not trying.

The action cannot go forward if the plaintiff is not a fair and adequate representative of similarly situated shareholders or members, and it cannot be dismissed or compromised without court approval, with notice of any proposed dismissal given to shareholders or members as the court directs.

Frequently Asked Questions

What must a derivative complaint allege?

It must be verified and allege that the plaintiff was a shareholder or member at the time of the challenged transaction, and plead with particularity the demand made on the directors (and shareholders if necessary) or the reasons for not making it.

Source & verification. Rule text and Committee commentary reproduced verbatim from the New Mexico Rules of Civil Procedure for the District Courts (Rule 1-023.1 NMRA), published by the New Mexico Compilation Commission (NMOneSource). Promulgated by the Supreme Court of New Mexico. The plain-English summary is original and draws on the official annotations. Last verified June 26, 2026. · Official source

Also known as: derivative actionshareholder derivative suitdemand requirement