Chapter 181

181.0741(2) (2) Representing corporation’s interests. The member fairly and adequately represents the interests of the corporation in enforcing the right of the corporation.

181.0741 History History: 1997 a. 79.

181.0741 Annotation The purpose of the derivative action statute is to allow members, under certain conditions, to bring a claim they could not otherwise bring at all because the cause of action belongs to the association and not to them. Neither the statute nor the case law suggests an intent to limit the right a member has to bring a cause of action that belongs to the member as an individual. Ewer v. Lake Arrowhead Ass’n, 2012 WI App 64, 342 Wis. 2d 194, 817 N.W.2d 465, 11-0113.

181.0742 181.0742 Derivative proceedings; demand. No member may commence a derivative proceeding until all of the following occur:

181.0742(1) (1) Written demand. A written demand is made upon the corporation to take suitable action.

181.0742(2) (2) Expiration of 90-day period. Ninety days expire from the date on which a demand under sub. (1) was made, unless the member is notified before the expiration of the 90 days that the corporation has rejected the demand or unless irreparable injury to the corporation would result by waiting for the expiration of the 90-day period.

181.0742 History History: 1997 a. 79.

181.0743 181.0743 Derivative proceedings; stay of proceedings. If the corporation or foreign corporation commences an inquiry into the allegations made in the demand under s. 181.0742 (1) or in the complaint, the court may stay any derivative proceeding for the period that the court considers appropriate.

181.0743 History History: 1997 a. 79.

181.0744 181.0744 Derivative proceedings; dismissal.

181.0744(1) (1) When dismissal required. The court shall dismiss a derivative proceeding on motion by the corporation if the court finds, subject to the burden of proof assigned under sub. (5) or (6), that one of the groups specified in sub. (2) or (6) has determined, acting in good faith after conducting a reasonable inquiry upon which its conclusions are based, that maintenance of the derivative proceeding is not in the best interests of the corporation.

181.0744(2) (2) Independent director determination. Unless a panel is appointed under sub. (6), the determination in sub. (1) shall be made by any of the following:

181.0744(2)(a) (a) A majority vote of independent directors present at a meeting of the board of directors if the independent directors constitute a quorum.

181.0744(2)(b) (b) A majority vote of a committee consisting of 2 or more independent directors appointed by a majority vote of the independent directors present at a meeting of the board of directors, whether or not the voting independent directors constitute a quorum.

181.0744(3) (3) Who is considered an independent director. Whether a director is independent for purposes of this section may not be determined solely on the basis of any one or more of the following factors:

181.0744(3)(a) (a) The nomination or election of the director by persons who are defendants in the derivative proceeding or against whom action is demanded.

181.0744(3)(b) (b) The naming of the director as a defendant in the derivative proceeding or as a person against whom action is demanded.

181.0744(3)(c) (c) The approval by the director of the act being challenged in the derivative proceeding or demand if the act resulted in no personal benefit to the director.

181.0744(4) (4) Pleadings when demand rejected. If a derivative proceeding is commenced after a determination was made rejecting a demand by a member, the complaint shall allege with particularity facts establishing any of the following:

181.0744(4)(a) (a) That a majority of the board of directors did not consist of independent directors at the time that the determination was made.

181.0744(4)(b) (b) That the requirements of sub. (1) have not been met.

181.0744(5) (5) Burden of proof. If a majority of the board of directors did not consist of independent directors at the time that the determination rejecting a demand was made, the corporation shall have the burden of proving that the requirements of sub. (1) have been met. If a majority of the board of directors consisted of independent directors at the time that the determination was made, the members shall have the burden of proving that the requirements of sub. (1) have not been met.

181.0744(6) (6) Court-appointed panel. Upon motion by the corporation, the court may appoint a panel of one or more independent persons to determine whether maintenance of the derivative proceeding is in the best interests of the corporation. If a panel is appointed under this subsection, the members shall have the burden of proving that the requirements of sub. (1) have not been met.

181.0744 History History: 1997 a. 79.

181.0745 181.0745 Derivative proceedings; discontinuance or settlement. A derivative proceeding may not be discontinued or settled without the court’s approval.

181.0745 History History: 1997 a. 79.

181.0746 181.0746 Derivative proceedings; payment of expenses.

181.0746(1) (1) Authority of court. On termination of the derivative proceeding, the court may do any of the following:

181.0746(1)(a) (a) Notwithstanding s. 814.04 (1), order the domestic corporation or foreign corporation to pay the plaintiff’s reasonable expenses, including attorney fees, incurred in the derivative proceeding by the members who commenced or maintained the derivative proceeding if the court finds that the derivative proceeding has resulted in a substantial benefit to the domestic corporation or foreign corporation.

181.0746(1)(b) (b) Order the members who commenced or maintained the derivative proceeding to pay any defendant’s reasonable expenses, including attorney fees, notwithstanding s. 814.04 (1), incurred in defending the derivative proceeding if the court finds that the derivative proceeding was commenced or maintained without reasonable cause or for an improper purpose.

181.0746(2) (2) Security for expenses. In any action brought in the right of any corporation by fewer than 3 percent of the members, the defendants shall be entitled, upon application to the court, to require the plaintiffs to give security for the reasonable expenses, including attorney fees. The amount of the security may be increased or decreased by the court having jurisdiction over the action upon a showing that the security has or may become inadequate or excessive.

181.0746 History History: 1997 a. 79.

181.0747 181.0747 Derivative proceedings; applicability.

181.0747(1) (1) To foreign corporations. In any derivative proceeding in the right of a foreign corporation, the matters covered by ss. 181.0741, 181.0742 and 181.0744 shall be governed by the laws of the jurisdiction of incorporation of the foreign corporation.

181.0747(2) (2) To corporations without members. Unless the articles of incorporation or bylaws provided otherwise at the time of the act or omission complained of, ss. 181.0741 to 181.0746 apply to corporations without members, except that all references to “member” shall be read as “director”.

181.0747 History History: 1997 a. 79.

subch. VIII of ch. 181 SUBCHAPTER VIII

DIRECTORS AND OFFICERS

181.0801 181.0801 Requirement for and duties of board.

181.0801(1) (1) Board required. A corporation shall have a board.

181.0801(2) (2) Powers of board. Except as provided in this chapter or sub. (3), all corporate powers shall be exercised by or under the authority of, and the affairs of the corporation managed under the direction of, its board.

181.0801(3) (3) Delegation.

181.0801(3)(a) (a) The articles of incorporation or bylaws approved by the members, if any, may authorize a person to exercise some or all of the powers which would otherwise be exercised by a board. To the extent so authorized such a person shall have the duties and responsibilities of the board, and the directors shall be relieved to that extent from such duties and responsibilities.

181.0801(3)(b) (b) A person is not a member of the board solely because of powers delegated to that person under par. (a).

181.0801 History History: 1997 a. 79.

181.0802 181.0802 Qualifications of directors. A director shall be an individual. The articles of incorporation or bylaws may prescribe other qualifications for directors. A director need not be a resident of this state or a member of the corporation unless the articles of incorporation or bylaws so prescribe.

181.0802 History History: 1997 a. 79.

181.0803 181.0803 Number of directors.

181.0803(1) (1) Minimum number. A board shall consist of 3 or more individuals, with the number specified in or fixed in accordance with the articles of incorporation or bylaws.

181.0803(2) (2) Changes in board size. The number of directors may be increased or, subject to sub. (1), decreased from time to time by amendment to, or in the manner provided in, the articles of incorporation or bylaws.

181.0803 History History: 1997 a. 79.

181.0804 181.0804 Election, designation and appointment of directors.

181.0804(1) (1) Corporation with members. If the corporation has members, all of the directors except the initial directors shall be elected at the first annual meeting of members, and at each annual meeting thereafter, unless the articles of incorporation or bylaws provide some other time or method of election, or provide that some of the directors are appointed by some other person or are designated.

181.0804(2) (2) Corporation without members. If the corporation does not have members, all of the directors except the initial directors shall be elected, appointed or designated as provided in the articles of incorporation or bylaws. If no method of designation or appointment is set forth in the articles of incorporation or bylaws, the directors other than the initial directors shall be elected by the board.

181.0804 History History: 1997 a. 79.

181.0805 181.0805 Terms of directors generally.

181.0805(1) (1) In general. The articles of incorporation or bylaws shall specify the term of a director. In the absence of any term specified in the articles of incorporation or bylaws, the term of a director shall be one year. Directors may be elected for successive terms.

181.0805(2) (2) Effect of changes on incumbent. A decrease in the number of directors or term of office does not shorten an incumbent director’s term.

181.0805(3) (3) Vacancies. Except as provided in the articles of incorporation or bylaws, the term of a director filling a vacancy in the office of a director elected by members expires at the next election of directors by members and the term of a director filling any other vacancy expires at the end of the unexpired term that the director is filling.

181.0805(4) (4) Service after expiration of term. Except as provided in the articles of incorporation or bylaws, despite the expiration of a director’s term, the director continues to serve, subject to ss. 181.0807 to 181.0810, until the director’s successor is elected, designated or appointed and qualifies, or until there is a decrease in the number of directors.

181.0805 History History: 1997 a. 79.

181.0806 181.0806 Staggered terms for directors. Directors may be divided into classes and the terms of office of the several classes need not be uniform.

181.0806 History History: 1997 a. 79.

181.0807 181.0807 Resignation of directors.

181.0807(1) (1) Notice. A director may resign at any time by delivering written notice to the presiding officer of the board or to the president or secretary.

181.0807(2) (2) When effective. A resignation is effective when the notice is received unless the notice specifies a later effective date. If a resignation is made effective at a later date, the board may make the effective date earlier and fill the pending vacancy before the effective date if the board provides that the successor does not take office until the effective date.

181.0807 History History: 1997 a. 79.

181.0808 181.0808 Removal of directors elected by members or directors. Except as otherwise provided in the articles of incorporation or bylaws of a corporation, all of the following apply:

181.0808(1) (1) Removal in general. The members may remove, with or without cause, one or more directors elected by them.

181.0808(2) (2) Removal of directors elected by group. If a director is elected by a class, chapter or other organizational unit or by region or other geographic grouping, the director may be removed only by the members of that class, chapter, unit or grouping.

181.0808(3) (3) Number of votes needed to remove. Except as provided in sub. (8), a director may be removed under sub. (1) or (2) only if the number of votes cast to remove the director would be sufficient to elect the director at a meeting to elect directors.

181.0808(4) (4) Cumulative voting. If cumulative voting is authorized, a director may not be removed if the number of votes, or if the director was elected by a class, chapter, unit or grouping of members, the number of votes of that class, chapter, unit or grouping, sufficient to elect the director under cumulative voting is voted against the director’s removal.

181.0808(5) (5) Meeting. A director elected by members may be removed by the members only at a meeting called for the purpose of removing the director and the meeting notice must state that the purpose, or one of the purposes, of the meeting is removal of the director.

181.0808(6) (6) Entire board. An entire board may be removed under subs. (1) to (5).

181.0808(7) (7) Board-elected directors. A director elected by the board may be removed without cause by the vote of a majority of the directors then in office or such other number as is set forth in the articles of incorporation or bylaws. However, a director elected by the board to fill the vacancy of a director elected by the members may be removed without cause by the members, but not the board.

181.0808(8) (8) Failure to attend meetings. If, at the beginning of a director’s term on the board, the articles of incorporation or bylaws provide that the director may be removed for missing a specified number of board meetings, the board may remove the director for failing to attend the specified number of meetings.

181.0808 History History: 1997 a. 79.

181.0809 181.0809 Removal of designated or appointed directors.

181.0809(1) (1) Designated directors. A designated director may be removed by an amendment to the articles of incorporation or bylaws deleting or changing the designation. The removal shall be effective on the effective date of the amendment to the articles of incorporation or bylaws, unless the amendment specifies a different date.

181.0809(2) (2) Appointed directors.

181.0809(2)(a) (a) Except as otherwise provided in the articles of incorporation or bylaws, an appointed director may be removed without cause by the person appointing the director.

181.0809(2)(b) (b) The person removing an appointed director shall do so by giving written notice of the removal to the appointed director and either the presiding officer of the board or the corporation’s president or secretary.

181.0809(2)(c) (c) A removal under this subsection is effective when the notice under par. (b) is effective under s. 181.0105 (4) unless the notice specifies a future effective date.

181.0809 History History: 1997 a. 79; 2021 a. 258.

181.0810 181.0810 Removal of directors by judicial proceeding.

181.0810(1) (1) Grounds for removal. The circuit court for the county where a corporation’s principal office is located may remove a director of the corporation from office in a proceeding commenced either by the corporation or by its members holding at least 10 percent of the voting power of any class, if the court finds all of the following:

181.0810(1)(a) (a) That the director engaged in fraudulent or dishonest conduct, or gross abuse of authority or a final judgment has been entered finding that the director has violated a fiduciary duty or a duty under ss. 181.0831 to 181.0833.

181.0810(1)(b) (b) That removal is in the best interest of the corporation.

181.0810(2) (2) Bar from serving. A court that removes a director may bar the director from serving on the board for a period prescribed by the court.