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.
Rule 23.1.Derivative actions by shareholders.
Last verified July 6, 2026
In one sentenceRule 23.1 sets special pleading and procedural requirements for a shareholder or member who sues on behalf of a corporation or unincorporated association to enforce a right the entity itself has refused to pursue.
Full Text of Rule 23.1
(dc) District court rule. Rule 23.1 does not apply in the district courts.
Amendment History
[Amended eff. 10-1-95.]
Committee Comments
Committee Comments on 1973 Adoption
Rule 23.1 recognizes distinctive aspects of actions by shareholders or members of unincorporated associations. Adequacy of representation can be the subject of examination as is provided in the Rule.
Note that the Rule requires an effort or excuse for making no effort, to obtain redress from the shareholders, if necessary. Alabama drew its earlier corporation statute from New York. The management of the corporation under these statutes was committed to the directors. Under such provision, it has been held that the authority of the stockholders as a body in corporate management is exhausted upon election of the directors. Continental Securities Co. v. Belmont, 206 N.Y. 7, 99 N.E. 138 (1912). In this context a demand would be fruitless but see American Life Ins. Co. v. Powell, 262 Ala. 560, 80 So.2d 487 (1955) wherein such a demand was a prerequisite to a derivative action. Since then, § 10-2-50 Code of Ala., now applies and its provisions do not conflict with the predecessor statute, Tit. 10, § 22, Code 1940. In Kinsaul v. Florala Telephone Co., 285 Ala. 16, 228 So.2d 777 (1969), Powell, supra, was cited for the requirement of seeking redress within the corporate body or alleging excuse for failure to do so. In Kinsaul, the plaintiffs were stockholders and directors and had made no allegation as to demand upon the board of directors or the stockholders.
Committee Comments to October 1, 1995, Amendment to Rule 23.1
The amendment is technical. No substantive change is intended.
District Court Committee Comments
The jurisdictional limitations applicable to the district court make it unsuitable for treatment of derivative actions by shareholders.
Plain-English Summary
Normally, a corporation decides for itself whether to sue over a wrong done to it, through the people who run it. But sometimes those same people are the ones accused of causing the harm, or they refuse to act, leaving the corporation's claim to sit unenforced. Rule 23.1 gives an individual shareholder or member a way around that impasse: a derivative action, where the shareholder sues on the corporation's behalf to enforce a right that belongs to the corporation, not to the shareholder personally. Any recovery in a successful derivative suit generally belongs to the corporation itself, even though a shareholder brought the case.
Because this kind of suit lets an outsider step into the shoes of a corporation's own management, Rule 23.1 imposes guardrails that an ordinary complaint does not need. The complaint must be verified, and it must show that the plaintiff held shares or membership at the time of the events being complained about, or inherited that stake through some legal transfer. It must also describe, in specific detail, what the plaintiff did to ask the corporation's directors or comparable leadership to take action themselves, and, if that effort was skipped, exactly why pursuing it would have been pointless. Vague or conclusory explanations are not enough; courts expect concrete facts showing why demand was made or would have been futile. On top of that, the suit cannot go forward if the plaintiff does not capably and adequately represent the interests of the other shareholders or members in the same position, and it cannot be dismissed or settled without a judge's approval and notice to the affected shareholders or members, for the same reason class settlements need court oversight: the deal affects people who are not the ones negotiating it.
Frequently Asked Questions
What is a derivative action, in plain terms?
It is a lawsuit brought by a shareholder or member on behalf of a corporation or association, to enforce a right that belongs to the entity itself rather than to the shareholder personally, because the people who normally control the entity have failed to enforce that right.
Why does the complaint have to describe efforts to ask the directors to act first?
Because the decision to sue ordinarily belongs to the corporation's own leadership, a shareholder generally must first ask the directors to pursue the claim, or explain in detail why making that request would have been futile, before a court will let the shareholder take over the corporation's claim.
What counts as a good enough excuse for not asking the directors to act?
Courts look for specific facts showing that a request would have been pointless, such as evidence that the directors themselves are the ones accused of wrongdoing, rather than a general assertion that the board is untrustworthy or unlikely to cooperate.
Can a shareholder settle or drop a derivative action on their own?
No. Because a derivative action is brought on behalf of the corporation and its other shareholders or members, it cannot be dismissed or compromised without court approval, and the other shareholders or members must be notified of the proposed resolution.
Source & verification. The rule text, amendment history, and Committee Comments are reproduced verbatim from the
official Alabama Rules of Civil Procedure (Ala. R. Civ. P. 23.1). Prescribed by the Supreme Court of Alabama (Ala. Const. amend. 328, § 6.11). The plain-English summary is original and written by us. Last verified July 6, 2026. ·
Official source
Also known as: shareholder derivative suitderivative action requirementsdemand futilitysuing on behalf of a corporationAla. R. Civ. P. 23.1