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
Group IV: Parties · Not amended since adoption on record · Last verified July 14, 2026
In one sentenceRule 23.1 sets the pleading requirements a shareholder or member must meet to sue on behalf of a corporation or unincorporated association when it has failed to enforce its own rights.
Full Text of Rule 23.1
Notes
Reporter’s Notes: This rule is identical to Federal Rule 23.1, with the omission of language pertinent only to federal jurisdiction. The rule provides certain additional safeguards for the shareholder’s derivative suit, such as allegation of the efforts made by the plaintiff to get the corporation to proceed on its own. Cf. Whitney v. Fairbanks, 54 Fed. 985 (C.C.D. Vt. 1893). The requirements of representation and notice of dismissal or compromise are similar to those of Rule 23. Note that the complaint must be verified—one of the few exceptions to Rule 11 on this point. The rule applies only to the case where the shareholder seeks to sue in the right of the corporation or association and not to actions brought by shareholders as a class, which are maintainable as ordinary class actions under Rule 23. Note that the rule requires an allegation that the plaintiff or his predecessors in interest were shareholders at the time of the transaction complained of. This requirement, like the similar provision of 9 V.S.A. § 4303, pertaining to suits for insiders’ profits, is intended to prevent a person from buying a lawsuit. See 2 Barron & Holtzoff, Federal Practice and Procedure § 566 (Wright ed. 1961).
Plain-English Summary
A derivative action lets a shareholder or member step in and sue on behalf of a corporation or association that has a valid claim but has not pursued it. Because the suit belongs to the entity rather than the individual bringing it, Rule 23.1 imposes safeguards beyond ordinary pleading rules: the complaint must be verified, and the plaintiff must have been a shareholder or member at the time of the transaction being challenged, or must have received that status afterward by operation of law, so no one can buy into a lawsuit after the fact.
The complaint must also describe, with particularity, what the plaintiff did to get the corporation's directors - and, if necessary, its shareholders or members - to take action, and explain why those efforts failed or why they were not attempted. The action cannot go forward if the plaintiff cannot adequately represent the interests of the other shareholders or members who share the same stake. And as with a class action, the case cannot be dismissed or settled without court approval, with notice to the shareholders or members whose rights are at stake.
Frequently Asked Questions
What must a derivative-action complaint allege about the plaintiff's stock or membership?
The complaint must be verified and must 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 devolved on the plaintiff afterward by operation of law.
Why does Rule 23.1 require detail about efforts made before suing?
The complaint must allege with particularity what efforts the plaintiff made to get the directors, and if necessary the shareholders or members, to pursue the claim themselves, and must explain why those efforts failed or were not made - this shows the entity failed to enforce its own right before the plaintiff stepped in.
Can the derivative action proceed if the plaintiff cannot represent other shareholders well?
No. The rule states that a derivative action may not be maintained if it appears that the plaintiff does not adequately represent the interests of similarly situated shareholders or members in enforcing the corporation's or association's right.
Can a shareholder derivative suit be settled without court oversight?
No. As with a class action, the action cannot be dismissed or compromised without court approval, and notice of the proposed dismissal or compromise must be given to shareholders or members as the court directs.
Is a derivative action the same thing as a shareholder class action?
No. Rule 23.1 applies only when a shareholder sues in the right of the corporation or association itself; a suit brought by shareholders as a class asserting their own claims is instead governed by Rule 23.
Source & verification. Rule text, official Reporter's Notes, and
amendment history are reproduced verbatim from the Vermont Rules of Civil Procedure,
adopted by the Vermont Supreme Court. Last verified July 14, 2026.
· Official source
Also known as: shareholder derivative suitderivative actionVRCP 23.1corporate demand requirement