Title 10 – Corporations and Associations

Chapter 31 – Directors and officers-nonprofit Corporations

Article 6 – Director’s Conflicting interest Transactions

• A. Members’ action respecting a transaction is effective for purposes of section 10-3861, subsection B, paragraph 2 if a majority of the votes entitled to be cast by the holders of all qualified membership interests was cast in favor of the transaction after all of the following:
• 1. Notice to members describing the director’s conflicting interest transaction.
• 2. Provision of the information referred to in subsection C of this section.
• 3. Required disclosure to the members who voted on the transaction, to the extent the information was not known by them.
• B. A majority of the votes entitled to be cast by the holders of all qualified membership interests is a quorum for the purposes of action that complies with this section. Subject to subsections C and D of this section, members’ action that otherwise complies with this section is not affected by the presence of members or the voting of membership interests that are not qualified membership interests.
• C. For purposes of compliance with subsection A of this section, a director who has a conflicting interest respecting the transaction shall inform, before the members’ vote, the secretary, or other officer or agent of the corporation authorized to tabulate votes, of the number and the identity of persons holding or controlling the vote of all membership interests that the director knows are beneficially owned, or the voting of which is controlled, by the director or by a related person of the director, or both.
• D. If a member’s vote does not comply with subsection A of this section solely because of a failure of a director to comply with subsection C of this section and if the director establishes that his failure did not determine and was not intended by him to influence the outcome of the vote, the court, with or without further proceedings respecting section 10-3861, subsection B, paragraph 3, may take such action, respecting the transaction and the director and give such effect, if any, to the members’ vote, as it considers appropriate in the circumstances.
• E. For purposes of this section, "qualified membership interests" means any membership interests entitled to vote with respect to the director’s conflicting interest transaction except membership interests that, to the knowledge, before the vote, of the secretary or other officer or agent of the corporation authorized to tabulate votes, are beneficially owned, or the voting of which is controlled, by a director who has a conflicting interest respecting the transaction or by a related person of the director, or both.