Pre-Derivative Suit Demand Letter Is Not Required In Pennsylvania When Corporation In Question Is Closely Held

In Pennsylvania, a claim of corporate waste is ordinarily derivative because the corporation is the directly injured party. Pennsylvania law generally provides that unless irreparable injury would result, a Plaintiff must make a written demand on the board of directors before filing a derivative action on behalf of the corporation.  Cuker v. Mikalauskas, 692 A.2d 1042, 1049 (Pa. 1997). An exception to that rule is found where the corporation is closely held. ALI Principles §7.01(d).  Pennsylvania law defines a “closely held” corporation to be one which has less than 30 shareholders. 15 Pa.C.S. §1103.  Hence, in corporations where there are less than 30 shareholders, a shareholder may file a derivative action on behalf of the corporation without making demand on the board of directors.