Corporate Interested-Director Transaction Requirements in Illinois
At a glance
| Governing law, entity, transaction, and covered-person scope | Illinois Business Corporation Act of 1983; ordinary domestic private corporation. Covers transaction where corporate director is direct/indirect party; section names directors, not a general officer-conflict or merely interested-relationship route (§§ 1.01, 8.60) |
|---|---|
| Interest, relationship, control, and materiality definitions | Indirect party means other party is entity where director has material financial interest or is officer, director, or general partner. Section does not define material, related person, control, independence, or disinterested (§ 8.60(b)) |
| Required disclosure, facts, timing, knowledge, and recipients | Material facts of transaction and director's interest or relationship disclosed or known to board/committee or shareholders entitled to vote before their authorization, approval, or ratification; no special written/confidentiality/tabulator disclosure stated (§ 8.60(a)(1)-(2)) |
| Disinterested or qualified board/committee composition, quorum, vote, and good faith | Board/committee authorization, approval, or ratification by affirmative majority of disinterested directors, even below quorum, removes validity proponent's fairness burden. No minimum two-director, good-faith, committee-selection, or exclusion-from-deliberation condition stated (§ 8.60(a)(1)) |
| Disinterested shareholder notice, voting group, quorum, consent, and threshold | Shareholders entitled to vote act after disclosure/knowledge without counting any shareholder vote of an interested director. Default meeting: majority of entitled votes represented forms quorum (never below one-third); majority represented/entitled approves, subject to greater Act/articles or class vote (§§ 7.60, 8.60(a)(2)) |
| Fairness alternative, relevant time, burden, and statutory standard | Transaction must be fair at authorization, approval, or ratification for interest not to invalidate it. Validity proponent bears fairness burden unless informed disinterested-board or shareholder route applies. No statutory fairness definition or express post-approval challenger burden (§ 8.60(a)) |
| Interested-person presence, participation, vote, abstention, and written consent | If transaction fair, direct/indirect party status does not invalidate transaction or director's vote; conflict approval still uses disinterested majority or excludes interested-director shareholder vote. Written board/committee action requires all entitled voters' signatures. Present director conclusively assents unless statutory dissent recorded/filed/mailed (§§ 8.45, 8.60(a), 8.65(b)) |
| Controlling stockholders, officers, compensation, and special transaction routes | No controlling-stockholder, going-private, compensation, or separate special-transaction route in § 8.60. Corporate officers are covered only when a director is indirectly a party by serving as officer of other transaction party; section does not independently cover an interested officer (§ 8.60(b)) |
| Statutory effect, remedies, records, fiduciary, and public-company boundaries | If transaction fair, director's direct/indirect party status is not ground to invalidate transaction or vote; approvals alter fairness burden, not a universal validity declaration. Corporation keeps board/committee/shareholder minutes; consent approvals filed with corporate records. Independent authorization, fiduciary, securities, public-company, enforcement, and remedy issues remain (§§ 7.75(a), 8.45(b), 8.60) |
Requirements one by one
Governing law, entity, transaction, and covered-person scope
805 ILCS 5/1.01 names the Business Corporation Act of 1983. Its conflict rule, 805 ILCS 5/8.60, covers a transaction in which a corporate director is directly or indirectly a party. It does not independently cover an interested officer, common directorship alone, a controlling stockholder, or a relationship where the director is not a direct or statutory indirect party.
Subsection (b) defines indirect party status: the transaction's other party is an entity in which the director has a material financial interest or serves as officer, director, or general partner. The section does not define materiality, control, related person, independence, or disinterested status.
Disclosure and disinterested-board approval
The material facts of the transaction and the director's interest or relationship must be disclosed to or known by the board or committee. It must then authorize, approve, or ratify through affirmative votes of a majority of disinterested directors. That group may be smaller than an ordinary quorum, and the statute states no minimum of two voters or separate good-faith condition.
The approval changes who must establish fairness in a validity challenge. It does not permit this cell to infer that the transaction was independently authorized or fair.
Shareholder approval excludes an interested director's vote
The shareholder route likewise requires disclosure to or knowledge by the shareholders entitled to vote. They authorize, approve, or ratify without counting the vote of any shareholder who is an interested director.
805 ILCS 5/7.60 supplies the ordinary meeting baseline: a majority of entitled votes represented is a quorum, which the articles cannot reduce below one- third, and a majority of represented votes entitled on the matter acts unless the Act or articles require a greater vote or voting by classes. Section 8.60's interested-director exclusion must be applied to that record.
Fairness and the burden rule
Section 8.60 begins with the fairness condition. If a transaction is fair to the corporation when authorized, approved, or ratified, the director's direct or indirect party status is not grounds to invalidate the transaction or the director's vote. The section gives no definition of fairness.
In a validity challenge, the person asserting validity bears the burden of proving fairness unless one of the informed disinterested-board or shareholder approval routes applies. The statute says the validity proponent loses that burden after qualifying approval; it does not expressly state the resulting burden or authorize a conclusion that approval itself proves fairness.
Participation, consent, and presumed assent
Section 8.60 does not invalidate a fair transaction or the director's vote because the director is a party. Its conflict-procedure approvals nevertheless require a disinterested board majority or exclude the interested director's shareholder vote.
For written board or committee action, 805 ILCS 5/8.45(a)-(c) requires every director entitled to vote or every committee member to sign, with approvals delivered to the secretary and filed in corporate records. Section 8.60 states no special interested-director abstention mechanism for written action.
At a meeting, 805 ILCS 5/8.65(b) conclusively presumes a present director assented unless dissent is entered in the minutes, filed in writing with the meeting secretary before adjournment, or immediately mailed by registered or certified mail to the corporate secretary. That record rule does not replace the conflict approval or fairness analysis.
Statutory effect and special-route boundaries
Section 8.60's stated effect is narrow: when the transaction is fair, direct or indirect party status does not invalidate the transaction or the director's vote. In a challenge, informed approval affects the validity proponent's fairness burden. The section states no separate officer, controlling- stockholder, going-private, compensation, loan, or public-company procedure.
Independent authorization, governing-document limits, fiduciary duties, securities requirements, enforcement, and other remedies remain outside that effect. A disclosure, approval, vote, or minute entry cannot support a broader validity statement.
Records and external boundaries
805 ILCS 5/7.75(a) requires correct and complete shareholder, board, and committee minutes. Section 8.45 separately places written approvals in the corporate records. These records can preserve disclosures, voter eligibility, approval, abstention, and dissent, but do not by themselves prove fairness, materiality, disinterestedness, authority, or fiduciary compliance.
What trips people up
Illinois makes fairness the predicate for the section's noninvalidation effect. Informed approval changes the validity proponent's burden; the statute does not say a disinterested vote conclusively establishes fairness.
The shareholder exclusion is also specific. Section 8.60(a)(2) excludes the vote of a shareholder who is an interested director; it does not use the broad qualified-share and related-person architecture found in some other states.
Common questions
May disinterested directors act below an ordinary quorum?
Yes. Section 8.60(a)(1) expressly permits a majority of disinterested directors even when they are less than a quorum for this conflict procedure.
Does § 8.60 cover an interested officer who is not a director?
No general officer route appears. An officer role matters when a corporate director is indirectly a party because that director is an officer of the transaction's other entity.
Does an interested director need to sign unanimous board consent?
Section 8.45 requires every director entitled to vote on the matter to sign, while § 8.60 supplies no special written abstention route. The governing documents and exact voter-entitlement record therefore matter.
Statutes and sources
- 805 ILCS 5/1.01 — Act name. Official ILGA text, accessed September 4, 2026.
- 805 ILCS 5/7.60 and 7.75(a) — shareholder quorum/vote and corporate minutes. Official § 7.60 and official § 7.75, accessed September 4, 2026.
- 805 ILCS 5/8.45 and 8.65(b) — written board action and meeting-assent record. Official § 8.45 and official § 8.65, accessed September 4, 2026.
- 805 ILCS 5/8.60 — conflict scope, fairness, disclosure, approvals, burden, and indirect-party definition. Official ILGA text, accessed September 4, 2026.
Source links
Every statute quoted above, linked, with the date we checked it.
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