Corporate Interested-Director Transaction Requirements in District of Columbia

At a glance

Requirements one by one

Governing law, transaction, and director scope

D.C. Code § 29-306.70 covers a transaction effected or proposed by the corporation or an entity the corporation controls. The trigger is that, at the relevant time, the director is a party, knowingly has a material financial interest, or knows a related person is a party or has such an interest.

Control includes direct or indirect majority governing-body election or removal power and a separate majority-risk-or-residual-returns test. The part does not create a general officer-conflict route.

Interest, related persons, and qualified directors

A material financial interest is one reasonably expected to impair the director's objectivity when participating in authorization. The related-person definition reaches detailed family and household ties, controlled entities, other-entity governor or governing-body roles, specified fiduciary roles, and the director's employer or an entity it controls.

Under D.C. Code § 29-301.21, a qualified director for this transaction has neither the conflict nor a material relationship with a conflicted director that would reasonably be expected to influence judgment. Nomination by an unqualified director and common service on another corporation's board do not, standing alone, destroy qualification.

Required and modified disclosure

Required disclosure includes the conflict's existence and nature plus every known transaction fact that a conflict-free director would reasonably see as material to deciding whether to proceed.

The modified route in § 29-306.72(b) is narrow. It applies only when the conflict arises from the specified related-person governor, fiduciary, or employer tie and the director reasonably believes full disclosure would violate law, an enforceable confidentiality obligation, or professional ethics. The director must give the qualified voters all nonviolative required information, disclose the conflict's existence and nature, and explain the nondisclosure duty.

Qualified-director action, committee, and authorization

The transaction needs an affirmative majority, never fewer than two, of the qualified directors who vote. They must deliberate and vote outside every other director's presence and without that person's participation.

An acting committee must consist entirely of qualified directors and either include all qualified directors on the board or members appointed by their affirmative majority. A majority—but never fewer than two—of all qualified directors on the board or committee forms the special quorum. The conflict part states no additional good-faith or negligence condition.

This vote provides the conflict protection, not independent authorization. If the articles, bylaws, or law impose another quorum or vote requirement, § 29-306.72(d) requires separate board or committee action; nonqualified directors may participate in that distinct action.

Qualified-share action and written holder information

D.C. Code § 29-306.73 requires a majority of votes cast by qualified shares after notice describing the proposed action and communication of required disclosure to the extent shareholders do not already know it. Before the vote, the conflicted director must tell the secretary or tabulator in writing the number and holder identity of every share the director knows is unqualified.

Qualified shares generally exclude those held by the conflicted director or a related person, although the employer-related person in § 29-306.70(5)(F) is excluded from that filter. A majority of votes entitled from all qualified shares forms quorum. Unqualified holders' presence and votes do not disturb an otherwise compliant conflict vote, but they may participate in any separate authorization action required by the governing documents or other law.

Fairness is defined and tied to the relevant time

The third route requires the transaction to be established fair to the corporation under circumstances at the relevant time. “Fair” means beneficial to the corporation as a whole, appropriately considering whether the director's dealings were fair and whether the consideration was comparable to what an arm's-length transaction might have obtained.

Relevant time is the qualified-director action, or, if the matter never goes to the board or committee, when the corporation or controlled entity becomes legally obligated to close. D.C. Code § 29-306.31(c)(1) says the general director-liability section does not alter the otherwise applicable burden to prove fairness or its absence; the conflict part does not assign that burden.

Participation, consent, and permanent records

Nonqualified directors are excluded from the special deliberation and vote but may participate in the separate authorization action. The conflict part states no written-consent abstention route. D.C. Code § 29-306.21 generally requires every director's signed consent in a record for board action without a meeting, so that general route should not be treated as erasing § 29-306.72's special deliberation, voting, and presence conditions.

Shareholder no-meeting action follows D.C. Code § 29-305.04 and must still meet the conflict route's qualified-share, notice, written holder-information, and disclosure rules. D.C. Code § 29-313.01 requires permanent meeting, no-meeting, and committee-action records; a record documents but does not prove full compliance.

Business opportunity and statutory effect

D.C. Code § 29-306.80 allows a director to bring a business opportunity to the corporation before becoming legally obligated and obtain a disclaimer using the qualified-director or qualified-share procedure after disclosure of all known material opportunity facts. Not using the advance procedure creates no adverse inference and does not change the otherwise applicable burden.

For an ordinary conflicting transaction, D.C. Code § 29-306.71 says compliant director action, compliant shareholder action, or established fairness bars equitable relief, damages, or other sanctions against the director on the ground of the director's interest. A nonconflicting transaction receives parallel interest-ground protection. Neither rule declares the transaction independently authorized, enforceable, or immune from governing-document, fiduciary, securities, or other law.

What trips people up

The special vote and authorization are separate. Qualified directors or shares can satisfy the conflict procedure while another vote remains necessary under the articles, bylaws, or law. The statute expressly allows nonqualified participants in that independent action.

The board route excludes every other director. The two-or-more qualified directors deliberate and vote outside other directors' presence; merely disregarding the conflicted director's vote is not the full procedure.

Qualified-share voting has two denominators. Approval is a majority of qualified votes cast, while quorum is a majority of votes entitled to be cast by all qualified shares.

Common questions

Can exactly two qualified directors act?

Yes, if they satisfy the majority vote, quorum, disclosure, deliberation, and committee-composition rules. The statute's floor is two, not one.

Can the conflicted director attend the special deliberation?

No. The qualified directors must deliberate and vote outside every other director's presence and without that director's participation.

Does the conflict vote authorize the transaction by itself?

Not necessarily. The statute requires separate action when another law or the articles or bylaws impose an independent authorization quorum or vote.

Statutes and sources

• D.C. Code § 29-301.21 — material interest, material relationship, and qualified director.
• D.C. Code §§ 29-306.70 to -306.73 — definitions, three protection routes, disclosure, qualified director and shareholder procedure, fairness, and independent authorization.
• D.C. Code § 29-306.80 — business-opportunity disclaimer and effect.
• D.C. Code §§ 29-305.04, 29-306.21, and 29-313.01 — shareholder and board no-meeting action and permanent records.

All are in the official D.C. Law Library Business Corporation Act, accessed September 4, 2026.