Corporate Interested-Director Transaction Requirements in California

At a glance

Requirements one by one

Governing law, entity, transaction, and covered-person scope

Cal. Corp. Code § 100 names the General Corporation Law. This cell applies its interested-director procedure to an ordinary domestic private corporation. Cal. Corp. Code § 310(a) covers a corporation's transaction with one or more of its directors and a transaction with another corporation, firm, or association in which a director has a material financial interest. Subsection (b) separately addresses a corporation or association linked by common directors.

Section 310 names directors and common directors, not a general officer-conflict procedure. It also does not replace any independent authority, governing- document, fiduciary, securities, or transaction-specific requirement.

Interest and relationship boundaries

Section 310 does not supply a general definition of “material financial interest.” It instead states two boundaries. A mere common directorship is not such an interest for subsection (a) and uses subsection (b); and a director is not interested in a resolution fixing another director's compensation merely because the first director also receives corporate compensation.

Those statutory statements do not decide whether any other financial interest is material or whether a relationship creates duties outside § 310.

Disclosure and the board or committee route

Under § 310(a)(2), the material facts about both the transaction and the director's interest must be fully disclosed or known to the board or committee. It must authorize, approve, or ratify in good faith through a vote sufficient without counting the interested directors. Unlike statutes that make disinterested approval a standalone route, California also requires the transaction to be just and reasonable to the corporation when it is authorized, approved, or ratified.

The common-director route in subsection (b)(1) likewise requires full disclosure or knowledge of the transaction and the other directorship, followed by a sufficient good-faith vote without the common directors. It alternatively recognizes good-faith shareholder approval.

Cal. Corp. Code § 307(a)(7)-(8), (b) supplies the ordinary board quorum and vote baseline, but makes the ordinary vote expressly subject to § 310. Section 310(c) allows interested and common directors to count toward meeting quorum; it does not make their votes count toward the conflict-procedure approval.

The shareholder route

Under § 310(a)(1), the shareholders must know or receive full disclosure of the material transaction and interest facts and approve in good faith. Shares owned by the interested directors are not entitled to vote on that approval.

Cal. Corp. Code § 153 defines shareholder approval as a majority of shares represented and voting at a duly held quorate meeting, with the affirmative shares also constituting at least a majority of the required quorum; it also recognizes shareholder written consent and any greater applicable articles or statutory threshold. The common-director branch does not state subsection (a)(1)'s interested-share exclusion, so the exact branch matters.

The just-and-reasonable alternative and burden

If neither subsection (a)(1) nor (a)(2) supplies approval, § 310(a)(3) assigns the person asserting the transaction's validity the burden of proving it was just and reasonable to the corporation at authorization, approval, or ratification. The common-director branch independently recognizes a transaction that was just and reasonable at that time under subsection (b)(2).

These are statutory standards and burdens, not conclusions this cell draws. Only the complete transaction record and applicable law can determine whether the standard is satisfied.

Interested-director written consent

California's special written-action rule lets an interested or common director abstain in writing and still count within “all members of the board” when the required disclosure reached the noninterested or noncommon directors before they signed, appeared conspicuously in their consents, and their vote was sufficient without the abstaining directors. The consents must be filed with the board minutes.

Section 307(b) also states the consequence of a disclosure defect in that specific consent route: the action is deemed approved, but the party asserting validity in a challenge bears the burden of establishing that the action was just and reasonable when approved. That procedural consequence is not a finding that the transaction is fair or otherwise valid.

Special routes and statutory effect

Section 310(a) prevents a covered transaction from being void or voidable because of the party relationship, the material financial interest, or the interested directors' presence when one of its stated routes applies. The common-director branch provides the same type of protection for its narrower relationship. The section does not state a special controlling-stockholder or general officer route.

California's later defective-action statute does not supply a shortcut. Cal. Corp. Code § 119(a)(5)(B) expressly says its ratification or validation process cannot be used for noncompliance with § 310(a) or (b). Independent lawful authorization and other applicable duties still have to be analyzed on their own terms.

Records and external boundaries

Cal. Corp. Code § 1500 requires minutes of shareholder, board, and board- committee proceedings in written form or another form convertible to clearly legible tangible form. Section 307(b) specifically places written board consents with the minutes. Those records can document the process but cannot by themselves establish full disclosure, good faith, materiality, fairness, authority, validity, or fiduciary compliance.

What trips people up

The material-financial-interest board route has two substantive predicates, not one. A sufficient good-faith vote without the interested directors is paired with the separate requirement that the transaction be just and reasonable when authorized, approved, or ratified.

Quorum and voting are also different questions. Section 310(c) allows an interested director to count toward quorum, while subsection (a)(2) requires a vote sufficient without counting that director's vote. Minutes should preserve the attendance, disclosure, participation, abstention, and vote record without turning those facts into a fairness conclusion.

Common questions

May an interested director attend the meeting?

Section 310 does not make presence itself disqualifying and subsection (c) allows the director to count toward quorum. Whether the director should participate in deliberation presents separate governing-document and fiduciary questions beyond this statutory procedure.

Does abstention alone validate the transaction?

No. The meeting route still requires the statute's disclosure, sufficient good-faith vote, and—under § 310(a)(2)—just-and-reasonable conditions. The written-consent exception has its own advance and conspicuous disclosure rules.

Can the general defective-action statute cure a missed § 310 process?

Not through that statute's ratification or validation procedure. Section 119(a)(5)(B) expressly excludes noncompliance with § 310(a) or (b).

Statutes and sources

• Cal. Corp. Code § 100 — General Corporation Law name. Official Legislative Counsel code, accessed September 4, 2026.
• Cal. Corp. Code § 310 — covered transactions, disclosure, shareholder and board routes, just-and-reasonable standard, common directors, compensation boundary, and quorum. Official code, accessed September 4, 2026.
• Cal. Corp. Code §§ 153 and 307 — shareholder approval and interested-director written board consent. Official code, accessed September 4, 2026.
• Cal. Corp. Code § 119(a)(5)(B) — defective-action exclusion. Official code, accessed September 4, 2026.
• Cal. Corp. Code § 1500 — corporate minutes and record form. Official code, accessed September 4, 2026.