§ 7-128-501 — Conflicting interest transaction

(1) As used in this section,
conflicting interest transaction means: A contract, transaction, or other financial
relationship between a nonprofit corporation and a director of the nonprofit
corporation, or between the nonprofit corporation and a party related to a director,
or between the nonprofit corporation and an entity in which a director of the
nonprofit corporation is a director or officer or has a financial interest.

(2) No loans shall be made by a corporation to its directors or officers. Any
director or officer who assents to or participates in the making of any such loan
shall be liable to the corporation for the amount of such loan until the repayment
thereof.

(3) No conflicting interest transaction shall be void or voidable or be
enjoined, set aside, or give rise to an award of damages or other sanctions in a
proceeding by a member or by or in the right of the nonprofit corporation, solely
because the conflicting interest transaction involves a director of the nonprofit
corporation or a party related to a director or an entity in which a director of the
nonprofit corporation is a director or officer or has a financial interest or solely
because the director is present at or participates in the meeting of the nonprofit
corporation's board of directors or of the committee of the board of directors that
authorizes, approves, or ratifies the conflicting interest transaction or solely
because the director's vote is counted for such purpose if:

(a) The material facts as to the director's relationship or interest and as to
the conflicting interest transaction are disclosed or are known to the board of
directors or the committee, and the board of directors or committee in good faith
authorizes, approves, or ratifies the conflicting interest transaction by the
affirmative vote of a majority of the disinterested directors, even though the
disinterested directors are less than a quorum; or

(b) The material facts as to the director's relationship or interest and as to
the conflicting interest transaction are disclosed or are known to the members
entitled to vote thereon, and the conflicting interest transaction is specifically
authorized, approved, or ratified in good faith by a vote of the members entitled to
vote thereon; or

(c) The conflicting interest transaction is fair as to the nonprofit corporation.

(4) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or of a committee
which authorizes, approves, or ratifies the conflicting interest transaction.

(5) For purposes of this section, a party related to a director shall mean a
spouse, a descendent, an ancestor, a sibling, the spouse or descendent of a sibling,
an estate or trust in which the director or a party related to a director has a
beneficial interest, or an entity in which a party related to a director is a director,
officer, or has a financial interest.

Legislative History

Source: L. 97: Entire article added, p. 700, � 3, effective July 1, 1998. L. 98: (3)(b) amended, p. 624, � 31, effective July 1.