Iowa Code 504.833 – Director conflict of interest
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1. A conflict of interest transaction is a transaction with the corporation in which a director of the corporation has a direct or indirect interest. A conflict of interest transaction is not voidable by the corporation on the basis of the director’s interest in the transaction if the transaction was fair at the time it was entered into or is approved as provided in subsection 2.
Terms Used In Iowa Code 504.833
- articles: includes amended and restated articles of incorporation and articles of merger. See Iowa Code 504.141
- board of directors: means the board of directors of a corporation except that no person or group of persons are the board of directors because of powers delegated to that person or group pursuant to section 504. See Iowa Code 504.141
- Bylaws: means the code or codes of rules other than the articles adopted pursuant to this chapter for the regulation or management of the affairs of a corporation irrespective of the name or names by which such rules are designated. See Iowa Code 504.141
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Corporation: means a public benefit, mutual benefit, or religious corporation. See Iowa Code 504.141
- Directors: means individuals, designated in the articles or bylaws or elected by the incorporators, and their successors and individuals elected or appointed by any other name or title to act as members of the board. See Iowa Code 504.141
- Entity: includes a domestic or foreign business corporation; domestic or foreign nonprofit corporation; domestic or foreign unincorporated entity; estate; trust; state; the United States; governmental subdivision; and foreign government. See Iowa Code 504.141
- following: when used by way of reference to a chapter or other part of a statute mean the next preceding or next following chapter or other part. See Iowa Code 4.1
- Quorum: The number of legislators that must be present to do business.
- Trustee: A person or institution holding and administering property in trust.
- Vote: includes authorization by written ballot and written consent. See Iowa Code 504.141
- Voting power: means the total number of votes entitled to be cast for the election of directors at the time the determination of voting power is made, excluding a vote that is contingent upon the happening of a condition or event that has not occurred at the time. See Iowa Code 504.141
2. A transaction in which a director of a corporation has a conflict of interest may be approved if either of the following occurs:
a. The material facts of the transaction and the director’s interest were disclosed or known to the board of directors or a committee of the board and the board or committee of the board authorized, approved, or ratified the transaction.
b. The material facts of the transaction and the director’s interest were disclosed or known to the members and they authorized, approved, or ratified the transaction.
3. For the purposes of this section, a director of the corporation has an indirect interest in a transaction under either of the following circumstances:
a. If another entity in which the director has a material interest or in which the director is a general partner is a party to the transaction.
b. If another entity of which the director is a director, officer, or trustee is a party to the transaction.
4. For purposes of subsection 2, a conflict of interest transaction is authorized, approved, or ratified if it receives the affirmative vote of a majority of the directors on the board or on a committee of the board who have no direct or indirect interest in the transaction, but a transaction shall not be authorized, approved, or ratified under this section by a single director. If a majority of the directors on the board who have no direct or indirect interest in the transaction vote to authorize, approve, or ratify the transaction, a quorum is present for the purpose of taking action under this section. The presence of, or a vote cast by, a director with a direct or indirect interest in the transaction does not affect the validity of any action taken under subsection 2, paragraph “a”, if the transaction is otherwise approved as provided in subsection 2.
5. For purposes of subsection 2, paragraph “b”, a conflict of interest transaction is authorized, approved, or ratified by the members if it receives a majority of the votes entitled to be counted under this subsection. Votes cast by or voted under the control of a director who has a direct or indirect interest in the transaction, and votes cast by or voted under the control of an entity described in subsection 3, paragraph “a”, shall not be counted in a vote of members to determine whether to authorize, approve, or ratify a conflict of interest transaction under subsection 2, paragraph “b”. The vote of these members, however, is counted in determining whether the transaction is approved under other sections of this chapter. A majority of the voting power, whether or not present, that is entitled to be counted in a vote on the transaction under this subsection constitutes a quorum for the purpose of taking action under this section.
6. The articles, bylaws, or a resolution of the board may impose additional requirements on conflict of interest transactions.