Kentucky Statutes 273.219 – Conflict-of-interest transaction
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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 shall not be the subject of equitable relief on the ground of the director’s interest in the transaction if:
(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 duly constituted under KRS § 273.221, and the board of directors or the committee authorized, approved, or ratified the transaction; or
(b) The transaction was fair to the corporation.
(2) For purposes of this section, a director of the corporation has an indirect interest in a transaction if:
(a) Another entity in which he or she has a material financial interest is a party to the transaction; or
(b) Another entity of which he or she is a director, officer, general partner, manager, trustee, or person in a similar position is a party to the transaction, and the transaction is or should be considered by the board of directors of the corporation.
(3) For purposes of subsections (1)(a) and (2)(b) of this section, director authorization, approval, or ratification is effective if done by a majority vote of the directors who do not have a direct or indirect interest in the transaction within the meaning of this section, even if the majority is less than a quorum, but a transaction may not be authorized, approved, or ratified by a single director. Director authorization may be delegated to a committee under KRS § 273.221, provided that no director appointed to the committee has a direct or indirect interest within the meaning of this section. Director action under this section shall be done by a higher number than a majority, if the articles of incorporation or bylaws so provide.
(4) For purposes of subsection (1) of this section, a director who has a direct or indirect interest in a transaction with the corporation shall bear the burden of proving that the transaction was fair to the corporation.
Effective: July 14, 2018
History: Repealed and reenacted 2018 Ky. Acts ch. 193, sec. 5, effective July 14, 2018.
— Created 1988 Ky. Acts ch. 224, sec. 13, effective July 15, 1988.
(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 duly constituted under KRS § 273.221, and the board of directors or the committee authorized, approved, or ratified the transaction; or
Terms Used In Kentucky Statutes 273.219
- Action: includes all proceedings in any court of this state. See Kentucky Statutes 446.010
- 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: may extend and be applied to any corporation, company, partnership, joint stock company, or association. See Kentucky Statutes 446.010
- Directors: when applied to corporations, includes managers or trustees. See Kentucky Statutes 446.010
- Equitable: Pertaining to civil suits in "equity" rather than in "law." In English legal history, the courts of "law" could order the payment of damages and could afford no other remedy. See damages. A separate court of "equity" could order someone to do something or to cease to do something. See, e.g., injunction. In American jurisprudence, the federal courts have both legal and equitable power, but the distinction is still an important one. For example, a trial by jury is normally available in "law" cases but not in "equity" cases. Source: U.S. Courts
- Quorum: The number of legislators that must be present to do business.
- Trustee: A person or institution holding and administering property in trust.
(b) The transaction was fair to the corporation.
(2) For purposes of this section, a director of the corporation has an indirect interest in a transaction if:
(a) Another entity in which he or she has a material financial interest is a party to the transaction; or
(b) Another entity of which he or she is a director, officer, general partner, manager, trustee, or person in a similar position is a party to the transaction, and the transaction is or should be considered by the board of directors of the corporation.
(3) For purposes of subsections (1)(a) and (2)(b) of this section, director authorization, approval, or ratification is effective if done by a majority vote of the directors who do not have a direct or indirect interest in the transaction within the meaning of this section, even if the majority is less than a quorum, but a transaction may not be authorized, approved, or ratified by a single director. Director authorization may be delegated to a committee under KRS § 273.221, provided that no director appointed to the committee has a direct or indirect interest within the meaning of this section. Director action under this section shall be done by a higher number than a majority, if the articles of incorporation or bylaws so provide.
(4) For purposes of subsection (1) of this section, a director who has a direct or indirect interest in a transaction with the corporation shall bear the burden of proving that the transaction was fair to the corporation.
Effective: July 14, 2018
History: Repealed and reenacted 2018 Ky. Acts ch. 193, sec. 5, effective July 14, 2018.
— Created 1988 Ky. Acts ch. 224, sec. 13, effective July 15, 1988.