The North Carolina Business Court has ruled on a case involving a challenge to a state law that affects shareholders' rights in derivative lawsuits. The case, Present v. State of N.C. (Docket No. 26-CVS-24512), centers on a provision that requires shareholders to own stock for at least one year before they can file a lawsuit on behalf of a corporation. The court's decision impacts shareholders in North Carolina and raises questions about access to legal remedies for corporate governance issues.

The plaintiff, Scott Present, filed the lawsuit against the State of North Carolina and two prominent legislative figures, Destin Hall and Philip Berger, in their official capacities. Present, who resides in Florida, became a shareholder of cbdMD, Inc., a North Carolina-based public corporation, in December 2025. He claims that the one-year requirement imposed by North Carolina General Statutes § 55-7-48(1) violates his constitutional rights, specifically the Open Courts provision of the North Carolina Constitution and the Contracts Clause of the U.S. Constitution.

The dispute began when Present sought to file a derivative lawsuit against cbdMD's Board of Directors, alleging breaches of fiduciary duties. However, he found himself unable to pursue this legal remedy due to the statutory requirement that he must have been a shareholder for at least one year. Present filed his initial complaint in June 2026 and later amended it to include his constitutional challenges.

The North Carolina Business Court, presided over by Judge Mark A. Davis, considered the defendants' motion to dismiss the case. The court ruled on two types of challenges presented by Present: as-applied and facial constitutional challenges. In the as-applied challenge, Present argued that the statute violates the Contracts Clause by impairing his rights as a shareholder. However, the court found that the law was enacted before Present became a shareholder, thus it could not be said to impair any contractual obligation. The court stated, "Because § 55-7-48(1) was enacted before cbdMD came into existence (and before Plaintiff became a shareholder), the statute cannot be properly characterized as impairing any contractual obligation found in the Articles of Incorporation in violation of Plaintiff’s rights."

As a result, the court granted the defendants' motion to dismiss Present's as-applied challenge based on the Contracts Clause. The court also dismissed Present's as-applied challenge based on the Open Courts provision, concluding that the General Assembly has the authority to impose restrictions on the exercise of rights it creates. The court noted, "The legislature has the power to define the circumstance under which a remedy is legally cognizable... This is precisely what the General Assembly has done here."

However, the court did not dismiss Present's facial challenge to the statute. Instead, it ruled that such a challenge must be transferred to a three-judge panel of the Superior Court in Wake County. The court explained that facial challenges to the validity of a statute must be handled by a three-judge panel, as outlined in North Carolina law. Judge Davis stated, "When a party properly advances a facial challenge to the constitutionality of a statute, the trial court lacks jurisdiction to rule on the facial challenge."

The impact of this ruling is significant for shareholders in North Carolina. By dismissing the as-applied challenges, the court has upheld the one-year requirement as it currently stands. This could limit shareholders' ability to seek legal remedies for corporate governance issues, particularly for those who have recently acquired shares. The transfer of the facial challenge to a three-judge panel indicates that the court recognizes the importance of this issue and that further review is necessary.

Looking ahead, the facial challenge will be heard by a three-judge panel, which could lead to a different outcome regarding the constitutionality of the one-year requirement. This case highlights ongoing debates about shareholder rights and access to justice in corporate governance matters. It remains to be seen how the three-judge panel will address the issues raised by Present and whether any changes to the law may result from this legal challenge.

In conclusion, the North Carolina Business Court's ruling in Present v. State of N.C. has clarified the legal landscape for shareholders in the state. While the court dismissed key claims against the one-year requirement for derivative lawsuits, it has allowed for further examination of the statute's facial constitutionality. Shareholders and legal observers will be closely watching the next steps in this case as it moves forward.