Directors and Officers – Duty of Loyalty – Per Se Voidability – Delawares Interested Transaction Statute

Question 1

A transaction involving an __________ director is valid if the material facts as to the director’s interest are _________ or _____ to the board of directors and the board in good faith authorizes the transaction by an ___________ vote of the __________ directors.

Answer 1

A transaction involving an INTERESTED director is valid if the material facts as to the director’s interest are DISCLOSED or KNOWN to the board of directors and the board in good faith authorizes the transaction by an AFFIRMATIVE vote of the DISINTERESTED directors.

Question 2

Can a corporation’s transaction directly benefitting one of the corporation’s directors be valid?

Answer 2

Yes. A transaction involving an interested director is valid if the material facts as to the director’s interest are disclosed or known to the board of directors and the board in good faith authorizes the transaction by an affirmative vote of the disinterested directors.