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 he complains or that his share or membership thereafter devolved on him by operation of law. The complaint shall also allege with particularity the efforts, if any, made by the plaintiff to obtain the action he desires from the directors or comparable authority and, if necessary, from the shareholders or members, and the reasons for his 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.Actions by Shareholders
Not amended since adoption on record · Last verified July 13, 2026
In one sentenceRule 23.1 lets a shareholder or member sue on behalf of a corporation or unincorporated association to pursue a claim the entity itself has refused to bring.
Full Text of Rule 23.1
Reporter's Notes
Reporter’s Notes to Rule 23.1: 1. Rule 23.1 is identical to FRCP 23.1.
2. Both this and FRCP 23.1 are silent concerning the "security for expenses" provision of many state business corporation acts, including that found in Ark. Stat. Ann. § 64-223(c)(d) (Repl. 1962). Since the decision in Cohen v. Beneficial Industrial Loan Corporation, 337 U.S. 541, 69 S. Ct. 1221 (1949), it has generally been considered that such acts were substantive in nature and should be followed in diversity actions in federal courts. Consequently, the adoption of this rule does not supersede or repeal the "security for expenses" provision found in the Arkansas Business Corporation Act. The same is also true with regard to the matter of attorney’s fees, which under Ark. Stat. Ann. § 64-223 (Repl. 1962), may be awarded to either plaintiff or defendant, depending upon which prevailed in the action. See Wright & Miller, Federal Practice and Procedure, § 1841.
3. This rule follows prior Arkansas law as found in Ark. Stat. Ann.§ 64-223(f) (Repl. 1962) which required court approval to dismiss or compromise a derivative action. This rule goes further, however, and requires that notice of a proposed dismissal or compromise be given to other shareholders or members in such manner as the court may direct. This is simply to afford an opportunity for other stockholders to voice objection to any proposed settlement or dismissal.
Plain-English Summary
A derivative suit lets an owner step into the shoes of the business to chase a claim the business itself won't pursue — often a claim against the company's own directors or officers. Because the shareholder is suing on someone else's behalf, Rule 23.1 imposes guardrails that don't apply to an ordinary lawsuit. The complaint must be verified, and the plaintiff must have held stock or membership at the time of the events being challenged, or have inherited that stake by operation of law — a requirement that keeps someone from buying into a company for the purpose of manufacturing a lawsuit.
The plaintiff also has to plead, with particularity, what efforts were made to get the corporation's directors — and, if that fails, the shareholders — to pursue the claim voluntarily, or explain why making that demand would have served no purpose. This demand requirement reflects a basic principle of corporate governance: decisions about whether to sue belong to the people who run the company, and a shareholder can bypass that only after the ordinary channels have been tried or shown to be futile.
Because a derivative plaintiff stands in for everyone else who owns a stake in the company, the rule requires that the plaintiff be able to protect those absent owners' interests, and it bars the case from being dismissed or compromised without court approval and notice to the other shareholders or members. That mirrors the protections Rule 23 builds into class actions generally, and it gives other owners a chance to object before a derivative claim gets resolved on their behalf.
Frequently Asked Questions
What is a shareholder derivative action?
It's a lawsuit brought by a shareholder or member to enforce a right that belongs to the corporation or association itself, filed because the entity's own management has failed to pursue that right. The recovery, if any, generally goes to the corporation rather than to the individual shareholder who filed suit.
Why does Rule 23.1 require the complaint to describe efforts to get the corporation to sue?
Because the decision to litigate ordinarily belongs to a corporation's directors, not to any single shareholder. Requiring the plaintiff to detail a demand on the directors — or explain why demand would have been futile — makes sure the derivative suit is a last resort rather than a shortcut around normal corporate decision-making.
Can any shareholder bring a derivative action?
Only a shareholder who held stock at the time of the challenged transaction, or who inherited that stake by operation of law, and who can adequately represent the interests of similarly situated shareholders. A plaintiff who doesn't meet those conditions can't maintain the action.
Can a derivative suit be settled without telling the other shareholders?
No. Rule 23.1 requires court approval before a derivative action can be dismissed or compromised, and the court must direct that notice of the proposed dismissal or compromise go to the other shareholders or members so they have a chance to weigh in.
How does a derivative action differ from a direct claim by a shareholder?
A derivative action enforces a right that belongs to the corporation — the shareholder sues on the company's behalf. A direct claim, by contrast, is one the shareholder brings for an injury to the shareholder personally, and it doesn't carry the demand and verification requirements Rule 23.1 imposes.
Source & verification. Rule text, Reporter's Notes, and amendment
history are reproduced verbatim from the Arkansas Rules of Civil Procedure, prescribed by
the Arkansas Supreme Court. The plain-English summary is original and written by us.
Last verified July 13, 2026. ·
Official source
Also known as: shareholder derivative suit arkansasdemand requirement corporate litigationsuing on behalf of a corporationderivative action rule 23.1minority shareholder lawsuit