§523. Actions by shareholders or members to enforce a secondary right.

(a) General rule.--In any action brought to enforce a secondary right on the part of one or more shareholders or members against any officer or director or former officer or director of a banking institution or a savings association, because the corporation refuses to enforce rights which may properly be asserted by it, the plaintiff or plaintiffs must aver and it must be made to appear that the plaintiff or each plaintiff was a shareholder or was a member of the corporation at the time of the transaction of which he complains or that his stock or membership devolved upon him by operation of law from a person who was a shareholder or member at that time.

(b) Security for costs.--In any such action instituted or maintained by a holder or holders of less than 5% of the outstanding shares of any class of the corporation or voting trust certificates therefor, or by a member or members of a corporation organized without capital stock which has outstanding contracts or accounts with its members if the value of the contracts or accounts held or owned by the member or members instituting or maintaining the suit is less than 5% of the value of all the contracts or accounts outstanding, the corporation in whose right the action is brought shall be entitled, at any stage of the proceedings, to require the plaintiff or plaintiffs to give security for the reasonable expenses, including attorneys' fees, which may be incurred by it in connection therewith and for which it may become liable pursuant to section 522 (relating to indemnification of authorized representatives) (but only insofar as relates to mandatory indemnification in actions by or in the right of the corporation) to which security the corporation shall have recourse in such amount as the court having jurisdiction shall determine upon the termination of the action. The amount of the security may, from time to time, be increased or decreased in the discretion of the court having jurisdiction of the action upon showing that the security provided has or may become inadequate or excessive.

(c) Definitions.--As used in this section, the following words and phrases shall have the meanings given to them in this subsection:

"Director." Includes any individual performing the function of director, regardless of title.

"Member." Includes depositors in a mutual banking institution.

(Dec. 19, 1990, P.L.834, No.198, eff. imd.)

Notation

1990 Amendment.  Act 198 amended subsec. (a).