Derivative Actions in Kentucky Nonprofit Corporations

Derivative Actions in Kentucky Nonprofit Corporations

 

      Kentucky’s nonprofit corporation statute, which is in many respects charitably characterized as antiquated, is largely (although not entirely) silent as to the bringing of derivative actions. Certain individuals have put forth the position that, as the statute is (largely) silent on derivative actions in nonprofit corporations, they do not exist. This position is flawed in that it assumes that derivative actions are created as a matter of positive law. In fact they are not. Rather, derivative actions arose in the courts of equity, and they are not dependent upon any statutory authorization.

In connection therewith, the Kentucky Law Journal Online has published Who Will Watch The Watchers?: Derivative Actions in Nonprofit Corporations, an article which reviews those rules as they arose in the courts of equity and the various cases that have explored the interrelationship of those rules of equitable standing and their subsequent reduction to statute. HERE IS A LINK to that article.