2006 Code of Virginia § 13.1-871 - Director conflicts of interests

13.1-871. Director conflicts of interests.

A. A conflict of interests transaction is a transaction with the corporationin which a director of the corporation has a direct or indirect personalinterest. A conflict of interests transaction is not voidable by thecorporation solely because of the director's interest in the transaction ifany one of the following is true:

1. The material facts of the transaction and the director's interest weredisclosed or known to the board of directors or a committee of the board ofdirectors and the board of directors or committee authorized, approved orratified the transaction; or

2. The material facts of the transaction and the director's interest weredisclosed to the members entitled to vote and they authorized, approved orratified the transaction; or

3. The transaction was fair to the corporation.

B. For purposes of this section, a director of the corporation has anindirect personal interest in a transaction if (i) another entity in which hehas a material financial interest or in which he is a general partner is aparty to the transaction or (ii) another entity of which he is a director,officer or trustee is a party to the transaction and the transaction is orshould be considered by the board of directors of the corporation. A vote orconsent of an entity in which the director has an interest described in thepreceding sentence is deemed to be a vote or consent of the director forpurposes of this section.

C. For purposes of subdivision 1 of subsection A of this section, a conflictof interests transaction is authorized, approved, or ratified if it receivesthe affirmative vote of a majority of the directors on the board ofdirectors, or on the committee, who have no direct or indirect personalinterest in the transaction, but a transaction may not be authorized,approved, or ratified under this section by a single director. If a majorityof the directors who have no direct or indirect personal interest in thetransaction vote to authorize, approve or ratify the transaction, a quorum ispresent for the purpose of taking action under this section. The presence of,or a vote cast by, a director with a direct or indirect personal interest inthe transaction does not affect the validity of any action taken undersubdivision 1 of subsection A of this section if the transaction is otherwiseauthorized, approved or ratified as provided in that subsection.

D. For purposes of subdivision 2 of subsection A of this section, a conflictof interests transaction is authorized, approved, or ratified if it receivesthe vote of a majority of the votes entitled to be cast by members whether ornot present, that may be counted under this subsection. A director who has adirect or indirect personal interest in the transaction may not vote todetermine whether to authorize, approve, or ratify a conflict of intereststransaction under subdivision 2 of subsection A of this section. His vote,however, may be counted in determining whether the transaction is approvedunder other sections of this Act. A majority of the members, whether or notpresent, who are entitled to be counted in a vote on the transaction underthis subsection constitutes a quorum for the purpose of taking action underthis section.

(Code 1950, 13.1-223; 1956, c. 428; 1985, c. 522.)