USA – GEORGIA Trends and Developments Contributed by: Louis Cohan, Bert Levy, Adrianna Prosdocimo and Grace Vigar, Cohan & Levy
centage of fault than the third party. They also have a defence from liability if reasonable efforts were made to contact law enforcement, alerting them of the imminent wrongful conduct. The sweeping changes brought by this new law should dramati - cally curtail negligent security claims in Georgia. Attracting businesses to Georgia through Corporate Code changes On 1 July 2026, numerous changes took effect regard - ing corporate internal governance and shareholder liti - gation. Each of these changes will add to the protec - tions Georgia law provides for corporations and their directors and officers. • Director and officer exculpation: previously, Geor - gia’s exculpation statute allowed companies to protect directors but not officers from certain legal and financial liability. Following the trend of other states and the Model Business Corporation Act, Georgia extended this statute to enable companies to provide for both director and officer exculpation. • Expansion of the Business Court: the Business Court, which is often preferred by companies for its expertise and expediency, may see an increase in cases on its docket after these changes take effect, as the subject matter jurisdiction of the Business Court has been expanded to include internal entity claims. In addition, companies can now mandate, via a forum selection clause in their by-laws or Articles of Incorporation, that certain claims be heard in the Business Court. • Derivative standing: certain publicly traded com - panies can now require shareholders to meet an ownership threshold of up to 1% of outstanding shares to have derivative standing. • Disclosure-only claims: these are no longer con - sidered a substantial benefit to the corporation for purposes of awarding attorney fees to plaintiffs in derivative proceedings. This change removes the economic incentives previously associated with supplemental disclosure cases. • Books and records requests: the definition of a proper purpose was restricted to exclude books and records requests made by shareholders involved in derivative proceedings or other civil litigation against the corporation. Relatedly, if there is a finding that the corporation denied a share -
holder’s inspection request in good faith, courts now have discretion to grant or deny a successful shareholder’s request for attorney fees. Striking a balance between HOA accountability and liability The boards of homeowners associations (HOAs) generally avoided judicial scrutiny so long as they exercised their authority in a “procedurally fair and reasonable” manner and if their substantive decisions were “made in good faith, and [were] reasonable and not arbitrary and capricious”. However, after hearing of abuses of power, the Georgia legislature recently engaged in significant HOA reform. Given this trend, developers of planned communities, HOAs and prop - erty management firms should consider the cumula - tive impact of HB 220 (2024), the Georgia Property Owners’ Bill of Rights Act (SB 406) and the Georgia HOA Accountability and Community Empowerment Act (HB 62). • HB 220 (2024): HB 220 went into effect on 1 July 2024 and introduced immediate changes, including a mandatory ten-day written notice before fines or liens can be imposed for violations, retained voting rights for homeowners who are delinquent only in fines (not assessments), and mandatory annual HOA meetings with financial disclosures. Also, when seeking injunctive relief, HOAs need not uti - lise or exhaust any other available remedies once the ten-day notice period expires. • SB 406: Georgia legislators had three goals in mind when drafting SB 406, all geared towards providing safeguards for homeowners: transpar - ency, accountability and due process. SB 406 will increase transparency when it goes into effect on 1 January 2027, because HOAs looking to collect fines or fees from homeowners will be required to register annually with the Georgia Secretary of State (“Secretary”) and submit their govern - ing documents. Furthermore, SB 406 creates an administrative process in an attempt to simplify the settlement of disputes between HOAs and home - owners. Instead of hiring an attorney and filing suit, a homeowner may file a complaint directly with the Secretary within 180 days of the HOA’s alleged misconduct. Filing the complaint stops the HOA from collecting disputed fines or fees from
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