shareholders must first demand that the board of directors enforce the corporation's rights, and this demand must be refused before a derivative suit is permitted demand is excusedif the shareholder establishes that it would have been futile to do so (if all members of the board are wrongdoers) if the directors, in good faith, refuse to sue, the shareholders may not proceed with the derivative suit demand on shareholders must be made if the impropriety could be remedied by a majority vote of the shareholders (such as breach of duties of care or loyalty); if the act cannot be ratified no demand is necessary Plaintiff must also put up security amount (cash or bond, so if P lose, the cost put out by Defendant will be paid for); not required in federal court unless diversity jurisdiction, then federal may look at state law