Effective - 28 Aug 2011
351.1075. Contracts and transactions, not voidable for material financial interest of director, when. — 1. (1) A contract or other transaction between a cooperative and one or more of its directors, or a cooperative and a business entity where one or more of the cooperative's directors is a director, manager, officer, or legal representative of such business entity or where a director has a material financial interest, is not void or voidable because the director or directors or the other business entity is a party thereto or because the director or directors are present at the meeting of the members or the board or a committee at which the contract or transaction is authorized, approved, or ratified, if:
(a) The contract or transaction was, and the person asserting the validity of the contract or transaction sustains the burden of establishing that the contract or transaction was, fair and reasonable as to the cooperative at the time it was authorized, approved, or ratified and:
a. The material facts as to the contract or transaction and as to the director's or directors' interest are disclosed or known to the members; or
b. The material facts as to the contract or transaction and as to the director's or directors' interest are fully disclosed or known to the board or a committee, and the board or committee authorizes, approves, or ratifies the contract or transaction in good faith by a majority of the board or committee, as the case may be, but the interested director or directors are not counted in determining the presence of a quorum and shall not vote; or
(b) The contract or transaction is a distribution, contract, or transaction that is made available on the same terms to all members or patron members as part of the cooperative's business; or
(c) The contract or transaction is for services provided to the cooperative which services were deemed necessary by the board, or a committee, or the chief executive officer, or the president and the contract to provide such services is no less favorable to the cooperative than such an agreement would be with a person who is not a member of the board negotiated at arm's length at a cost not more than the reasonable fair market value for the same services charged by other providers.
(2) A resolution fixing the compensation of a director as a director, officer, employee, or agent of the cooperative is not void or voidable or considered to be a contract or other transaction between the cooperative and one or more of its directors for purposes of this section even though the director receiving the compensation fixed by the resolution is present and voting at the meeting of the board or a committee at which the resolution is authorized, approved, or ratified or even though other directors voting upon the resolution are also receiving compensation from the cooperative.
(3) If a committee is appointed to authorize, ratify, or approve a contract or transaction under this section, the members of the committee shall not have a conflict of interest with respect to such contract or transaction and shall be charged with representing the best interests of the cooperative.
2. For purposes of this section, a director has a material financial interest in each contract or transaction in which the director or the spouse, parents, children and spouses of children, brothers and sisters and spouses of brothers and sisters, and the brothers and sisters of the spouse of the director or any combination of them have a material financial interest. For purposes of this section, a contract or other transaction between a cooperative and the spouse, parents, children and spouses of children, brothers and sisters and spouses of brothers and sisters, and the brothers and sisters of the spouse of a director or any combination of them, is considered to be a transaction between the cooperative and the director.
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(L. 2011 S.B. 366)