Florida House Bill 797 (2026) creates a comprehensive statutory framework governing derivative actions under newly created Sections 617.0741 through 617.0747 of the Florida Nonprofit Corporations Act. Because most Florida condominium, cooperative, and homeowners’ associations are organized as nonprofit corporations under Chapter 617, these provisions will have direct consequences for community associations throughout the state.
A derivative action is a lawsuit brought by a member of a corporation on behalf of the corporation itself. Unlike a direct claim, where a member seeks relief for an individual injury, a derivative action seeks to remedy alleged harm suffered by the association.
Historically, Florida law provided only limited guidance regarding derivative litigation involving nonprofit corporations. HB 797 establishes a detailed statutory framework addressing who may bring a claim, what procedural requirements must be met before litigation begins, and how claims may ultimately be resolved.
The new law implements formal demand requirements. Before filing suit, a member generally must provide the corporation with notice of a derivative claim and an opportunity to investigate and address the alleged misconduct. This requirement recognizes that decisions concerning litigation ordinarily belong to the boards of directors, not any individual members. Only when those responsible for governing the corporation fail or refuse to act may a member proceed on the corporation’s behalf.
The legislation also establishes procedures governing investigations of shareholder or member derivative claims. The new framework also addresses settlement procedures for derivative claims and provides a structure to ensure that settlements are evaluated for benefit to the corporation and its membership as a whole.
For association boards, these changes create both opportunities and responsibilities. On one hand, the statute provides procedural protections against premature litigation and establishes mechanisms for internal review of derivative claims.
For members, the legislation provides greater certainty regarding the process for pursuing derivative claims.
Ultimately, the derivative action provisions of HB 797 reflect a broader legislative trend toward increased accountability in nonprofit governance. Community association boards should review these provisions carefully with legal counsel to ensure compliance and to understand the significant procedural changes now governing derivative claims.
