Rule 23.1.Derivative Actions

Enacted effective October 1, 2011 · Last verified June 26, 2026

In one sentenceRule 23.1 governs shareholder and member derivative suits — requiring a verified complaint, allegations of standing and pre-suit demand (or why demand was excused), and court approval of any settlement.

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

Plain-English Summary

A derivative action is a lawsuit a shareholder or member brings on behalf of a corporation or unincorporated association, to enforce a right the entity itself has failed to pursue. Rule 23.1 sets the special pleading bar for these suits and requires that the plaintiff fairly and adequately represent other similarly situated owners.

The complaint must be verified and must allege that the plaintiff owned shares or membership at the time of the transaction complained of, that the suit is not a collusive attempt to manufacture jurisdiction, and — with particularity — the plaintiff's demand on the directors (and, if necessary, the owners) to take action, or the reasons for not making that demand. Any settlement, dismissal, or compromise requires court approval and notice to the owners.

Frequently Asked Questions

What is a derivative action?

A lawsuit brought by a shareholder or member on behalf of a corporation or association to enforce a right the entity has failed to pursue itself.

What is the demand requirement?

The verified complaint must state with particularity any effort the plaintiff made to get the directors (and, if necessary, the shareholders or members) to take the desired action — or explain why no such demand was made.

Source & verification. Reproduced verbatim from the Montana Code Annotated as published by the State Law Library of Montana and the Montana Legislature. This rule has not been amended since its adoption. Adopted by the Supreme Court of Montana (AF 07-0157). Last verified June 26, 2026. · Official text

Also known as: derivative actionshareholder derivativedemand requirement