A. A conflict of interest transaction is a transaction with the corporation in which a director of the corporation has a direct or indirect interest. A conflict of interest transaction is not voidable by the corporation solely because of the director's interest in the transaction if any one of the following is true:
(1) the material facts of the transaction and the director's interest were disclosed or known to the board of directors or a committee of the board of directors and the board of directors or committee authorized, approved or ratified the transaction;
(2) the material facts of the transaction and the director's interest were disclosed or known to the shareholders entitled to vote and they authorized, approved or ratified the transaction; or
(3) the transaction was fair to the corporation.
B. For purposes of this section, a director of the corporation has an indirect interest in a transaction if:
(1) another entity in which he has a material financial interest or in which he is a general partner is a party to the transaction; or
(2) another entity of which he is a director, officer or trustee is a party to the transaction and the transaction is or should be considered by the board of directors of the corporation.
For purposes of this section, a director of the corporation does not have a direct or indirect interest in a transaction solely because the transaction may involve or effect a change in control of the corporation or his continuation in office as a director of that corporation.
C. For purposes of Paragraph (1) of Subsection A of this section, a conflict of interest transaction is authorized, approved or ratified if it receives the affirmative vote of a majority of the directors on the board or [of] directors or on a committee of the board of directors who have no direct or indirect interest in the transaction but a transaction may not be authorized, approved or ratified under this section by a single director. If a majority of the directors who have no direct or indirect interest in the transaction vote to authorize, approve or ratify the transaction, a quorum is present for the purpose of taking action under this section. The presence of or a vote cast by a director with a direct or indirect interest in the transaction does not affect the validity of any action taken under Paragraph (1) of Subsection A of this section if the transaction is otherwise authorized, approved or ratified as provided in that subsection.
D. For purposes of Paragraph (2) of Subsection A of this section, a conflict of interest transaction is authorized, approved or ratified if it receives the vote of a majority of the shares entitled to be counted under this subsection. Shares owned by or voted under the control of a director who has a direct or indirect interest in the transaction and shares owned by or voted under the control of an entity described in Paragraph (2) of Subsection B of this section may not be counted in a vote of shareholders to determine whether to authorize, approve or ratify a conflict of interest transaction under Paragraph (2) of Subsection A of this section. The vote of those shares, however, is counted in determining whether the transaction is approved under other sections of the Business Corporation Act. A majority of the shares, whether or not present, that are entitled to be counted in a vote on the transaction under this subsection constitutes a quorum for the purpose of taking action under this section.
History: 1978 Comp., § 53-11-40.1, enacted by Laws 1987, ch. 238, § 11.
ANNOTATIONSBracketed material. — The bracketed material in Subsection C was inserted by the compiler and is not part of the law.