1. As used in this section “corporation” includes an unincorporated association, and “board of directors” includes the managing body of an unincorporated association.

2. In an action brought to enforce a secondary right on the part of one or more shareholders in a corporation or association, incorporated or unincorporated, because the corporation or association refuses to enforce rights which may properly be asserted by it, the complaint must be verified by oath and must aver that the plaintiff was a shareholder at the time of the transaction of which the plaintiff complains or that the plaintiff’s share thereafter devolved on the plaintiff by operation of law. The complaint must also set forth with particularity the efforts of the plaintiff to secure from the board of directors or trustees and, if necessary, from the shareholders such action as the plaintiff desires, and the reasons for the plaintiff’s failure to obtain such action or the reasons for not making such effort.

3. In any such action, at any time within 30 days after service of summons upon the corporation or any defendant who is an officer or director of the corporation, or held such office at the time of the acts complained of, the corporation or such defendant may move the court for an order, upon notice and hearing, requiring the plaintiff to furnish security as hereinafter provided. Such motion must be based upon one or more of the following grounds:

(a) That there is no reasonable possibility that the prosecution of the cause of action alleged in the complaint against the moving party will benefit the corporation or its security holders.

(b) That the moving party, if other than the corporation, did not participate in the transaction complained of in any capacity.

The court on application of the corporation or any defendant may, for good cause shown, extend the 30-day period for an additional period or periods not exceeding 60 days.

4. At the hearing upon such motion, the court shall consider such evidence, written or oral, by witnesses or affidavit, as may be material:

(a) To the ground or grounds upon which the motion is based; or

(b) To a determination of the probable reasonable expenses, including attorney’s fees, of the corporation and the moving party which will be incurred in the defense of the action. If the court determines, after hearing the evidence adduced by the parties at the hearing, that the moving party has established a probability in support of any of the grounds upon which the motion is based, the court shall fix the nature and amount of security to be furnished by the plaintiff for reasonable expenses, including attorney’s fees, which may be incurred by the moving party and the corporation in connection with such action, including expenses which the corporation may incur by reason of any obligation which it may have to indemnify its officers or directors pursuant to NRS 78.7502 or otherwise. A determination by the court that security either must or must not be furnished or must be furnished as to one or more defendants and not as to others shall not be deemed a determination of any one or more issues in the action or of the merits thereof. The corporation and the moving party have recourse to the security in such amount as the court determines upon the termination of the action. The amount of the security may thereafter from time to time be increased or decreased in the discretion of the court upon showing that the security provided has or may become inadequate or is excessive. If the court, upon any such motion, makes a determination that security must be furnished by the plaintiff as to any one or more defendants, the action must be dismissed as to such defendant or defendants, unless the security required by the court is furnished within such reasonable time as may be fixed by the court.

5. If any such motion is filed, no pleadings need be filed by the corporation or any other defendants, and the prosecution of the action must be stayed, until 10 days after the motion has been disposed of.

(Added to NRS by 1965, 1411; A 1969, 116; 1997, 731)