13.1-691 - Director conflict of interests. - Virginia Statutes

§ 13.1-691. Director conflict of interests.

A. A conflict of interests transaction is a transaction with the corporationin which a director of the corporation has an interest that precludes thedirector from being a disinterested director. A conflict of intereststransaction is not voidable by the corporation solely because of thedirector's interest in the transaction if any 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;

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

3. The transaction was fair to the corporation.

B. For purposes of subdivision A 1, a conflict of interests transaction isauthorized, approved, or ratified if it receives the affirmative vote of amajority of the disinterested directors on the board of directors, or on thecommittee. A transaction shall not be authorized, approved, or ratified underthis section by a single director. If a majority of the disinteresteddirectors 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 who is not disinterested does not affect thevalidity of any action taken under subdivision A 1 if the transaction isotherwise authorized, approved or ratified as provided in that subsection.

C. For purposes of subdivision A 2, a conflict of interests transaction isauthorized, approved, or ratified if it receives the vote of a majority ofthe shares entitled to be counted under this subsection. Shares owned by orvoted under the control of a director who is not disinterested may not becounted in a vote of shareholders to determine whether to authorize, approve,or ratify a conflict of interests transaction under subdivision A 2. The voteof those shares, however, shall be counted in determining whether thetransaction is approved under other sections of this chapter. A majority ofthe shares, whether or not present, that are entitled to be counted in a voteon the transaction under this subsection constitutes a quorum for the purposeof taking action under this section.

(Code 1950, § 13.1-39.1; 1975, c. 500; 1980, c. 341; 1985, c. 522; 2005, c.765.)