§ 1728 — Interested directors or officers; quorum

Pennsylvania § 1728

• Jurisdiction: Pennsylvania
• Title 15: CORPORATIONS AND UNINCORPORATED ASSOCIATIONS
• Part: PART II
• Ch. 17: OFFICERS, DIRECTORS AND SHAREHOLDERS
• Subch.: DIRECTORS AND OFFICERS

Text

(a) General rule.--A contract or transaction between a business corporation and one or more of its directors or officers or between a business corporation and another domestic or foreign corporation for profit or not-for-profit, partnership, joint venture, trust or other enterprise 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 shareholders entitled to vote thereon and the contract or transaction is specifically approved in good faith by vote of those shareholders;

(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 shareholders; 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 not wholly owned associations.--A contract or transaction between a business corporation and an association that is not wholly owned 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 business corporation and an association that is wholly owned 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 association.

(f) Cross references.--See sections 1715(d) (relating to exercise of powers generally) and 1730 (relating to compensation of directors).

Legislative History

(Nov. 3, 2022, P.L.1791, No.122, eff. 60 days) 2022 Amendment.Act 122 amended subsec. (a) and added subsecs. (d), (e) and (f). Special Provisions in Appendix.See section 404(b)(1) of Act 198 of 1990 in the appendix to this title for special provisions relating to applicability. Cross References.Section 1728 is referred to in sections 1715, 1745, 1746 of this title.