§ 5728 — Interested directors or officers; quorum

Pennsylvania § 5728

• Jurisdiction: Pennsylvania
• Title 15: CORPORATIONS AND UNINCORPORATED ASSOCIATIONS
• Part: PART II
• Ch. 57: OFFICERS, DIRECTORS AND MEMBERS
• Subch.: DIRECTORS, OFFICERS AND MEMBERS OF

Text

(a) General rule.--A contract or transaction between a nonprofit corporation and one or more of its directors or officers or between a nonprofit corporation and another domestic or foreign corporation for profit or not-for-profit, partnership, joint venture, trust or other association in which one or more of the corporation's directors or officers are governors or officers of the other association or have a financial or other interest, is not void or voidable solely for that reason, or solely because the director or officer of the corporation is present at or participates in the meeting of the board of directors that authorizes the contract or transaction, or solely because the vote of the director or officer is counted for that purpose, if:

(1) the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors and the board authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors even though the disinterested directors are less than a quorum;

(2) the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the members entitled to vote thereon, if any, and the contract or transaction is specifically approved in good faith by vote of those members;

(3) the contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified by the board of directors or the members; or

(4) the contract or transaction satisfies subsection (d) or (e).

(b) Quorum.--Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board that authorizes a contract or transaction specified in subsection (a).

(c) Applicability.--The provisions of this section shall be applicable except as otherwise restricted in the bylaws.

(d) Common governors or officers with nonwholly owned associations.--A contract or transaction between a nonprofit corporation and an association that is not wholly owned or controlled by the corporation is not void or voidable solely on the grounds that a person who is a director or officer of the corporation is also a governor or officer of the other association if:

(1) one of the conditions set forth in subsection (a)(1), (2) or (3) is satisfied; or

(2) (i) the director or officer does not participate personally and substantially in negotiating the transaction for either the corporation or the other association; and

(ii) if the transaction is approved by the governors of either association, the person that is a governor or officer of each association does not cast a vote that would be necessary at a meeting to approve the transaction on behalf of either association.

(e) Common governors or officers with wholly owned associations.--A contract or transaction between a nonprofit corporation and an association wholly owned or controlled by the corporation is not void or voidable solely on the grounds that a director or officer of the corporation is also a governor or officer of the wholly owned or controlled association.

(f) Cross references.--See sections 5715(d) (relating to exercise of powers generally) and 5730 (relating to compensation of directors).

Legislative History

(Dec. 21, 1988, P.L.1444, No.177, eff. Oct. 1, 1989; July 9, 2013, P.L.476, No.67, eff. 60 days; Nov. 3, 2022, P.L.1791, No.122, eff. 60 days) Cross References.Section 5728 is referred to in sections 5715, 5745, 5746 of this title.