Corporate Interested-Director Transaction Requirements in Indiana
At a glance
| Governing law, entity, transaction, and covered-person scope | Indiana Business Corporation Law; ordinary domestic for-profit corporation. Covers a transaction with the corporation in which its director has a direct or statutory indirect interest; no independent officer-conflict route (§§ 23-1-20-5, 23-1-35-2(a)-(b)) |
|---|---|
| Interest, relationship, control, and materiality definitions | Indirect interest when another party is an entity in which director has material financial interest or is general partner, or an entity where director is director/officer/trustee and transaction is or must be board-considered. No materiality, related-person, control, or independence definition (§ 23-1-35-2(b)) |
| Required disclosure, facts, timing, knowledge, and recipients | Material facts of transaction and director's interest disclosed or known to board/committee or shareholders entitled to vote before their authorization, approval, or ratification; no special writing, confidential-information, tabulator, or fuller timing rule (§ 23-1-35-2(a)(1)-(2)) |
| Disinterested or qualified board/committee composition, quorum, vote, and good faith | Affirmative majority of board/committee directors with no direct or indirect interest; never one director. Their majority supplies the conflict-procedure quorum. No separate good-faith, appointment, deliberation, or exclusion condition stated (§ 23-1-35-2(c)) |
| Disinterested shareholder notice, voting group, quorum, consent, and threshold | Shareholders entitled to vote act after disclosure/knowledge; interested director/control and covered-entity shares may count. Default meeting quorum is majority of entitled votes per group; votes for must exceed against, subject to articles/Act. Private-company consent may use meeting-equivalent votes unless articles opt out (§§ 23-1-29-4, 23-1-30-6 to -7, 23-1-35-2(a)(2), (d)) |
| Fairness alternative, relevant time, burden, and statutory standard | Transaction fair to corporation is a standalone alternative; section defines no fairness elements, relevant time, or burden allocation (§ 23-1-35-2(a)(3)) |
| Interested-person presence, participation, vote, abstention, and written consent | Interested director's presence or vote does not affect qualifying board action; vote is not needed for the conflict majority. General no-meeting board action requires every director's signed consent, with no special conflict abstention route; meeting dissent/abstention must be preserved (§§ 23-1-34-2, 23-1-34-5(d), 23-1-35-2(c)) |
| Controlling stockholders, officers, compensation, and special transaction routes | No controlling-stockholder, general officer, compensation, going-private, or public-company branch in § 23-1-35-2. Separate director-loan/guarantee and corporate-business-opportunity procedures apply (§§ 23-1-35-3, 23-1-35-5) |
| Statutory effect, remedies, records, fiduciary, and public-company boundaries | Not voidable by corporation solely because of director's interest if one statutory route applies; not a general validity finding. Director duties/liability rules remain separate; permanent meeting, consent, and committee-action records required (§§ 23-1-35-1, 23-1-35-2(a), 23-1-52-1(a), (d)) |
Requirements one by one
Covered transaction and indirect-interest scope
Ind. Code § 23-1-20-5 defines the covered domestic corporation as a for-profit corporation incorporated under or subject to the Indiana Business Corporation Law. Ind. Code § 23-1-35-2(a) then defines a conflict-of-interest transaction as a transaction with the corporation in which one of its directors has a direct or indirect interest.
The indirect-interest branches are narrower than a general relationship test. They cover another transaction party in which the director has a material financial interest or serves as general partner. They also cover an entity where the director serves as director, officer, or trustee, but only when the transaction is or must be considered by the corporation's board. The section does not define materiality, related person, control, or independence.
Disclosure and noninterested-director approval
Under Ind. Code § 23-1-35-2(a)-(c), the material facts of both the transaction and the director's interest must be disclosed to or known by the board or committee. The qualifying vote is an affirmative majority of the directors on that body who have no direct or indirect interest, and one director cannot act alone under this procedure.
That majority itself supplies the conflict-procedure quorum. The statute does not add a good-faith recital, special committee-appointment process, or qualified-only deliberation condition. Those omissions do not establish that any particular disclosure, voter, committee, or action satisfies other law or the corporation's governing documents.
Shareholder approval, vote, and consent
The shareholder route in Ind. Code § 23-1-35-2(a)(2), (d) likewise requires the transaction's material facts and the director's interest to be disclosed to or known by shareholders entitled to vote. Unlike statutes that exclude conflicted holdings, Indiana expressly allows shares owned by or controlled by the interested director, and shares owned by or controlled by a covered entity, to count.
Ind. Code §§ 23-1-30-6 to -7 supply the ordinary meeting baseline unless the articles or another provision changes it: each voting group needs a majority of its entitled votes for quorum, and votes favoring the action must exceed votes opposing it. Ind. Code § 23-1-29-4(a)-(d) allows unanimous written consent and, for a private corporation unless its articles provide otherwise, consent by the meeting-equivalent minimum. A consent has the effect of a meeting vote, but the section's delivery, record-date, 60-day collection, revocation, and effectiveness rules still apply.
Fairness is a separate, undefined alternative
Ind. Code § 23-1-35-2(a)(3) makes a transaction that "was fair to the corporation" a third alternative. The section does not define fairness, specify the time at which it is judged, or allocate a litigation burden. Board or shareholder approval and fairness are separate statutory routes; the cell does not convert a vote or disclosure record into a fairness finding.
Interested-director participation and written board action
The interested director's presence or vote does not affect otherwise qualifying action under Ind. Code § 23-1-35-2(c). That does not make the interested vote part of the required majority, which must consist of directors without a direct or indirect interest.
Indiana's general consent mechanics add a separate practical constraint. Ind. Code § 23-1-34-2 requires action without a board meeting to be taken by all members and signed by each director; the conflict section creates no special written-abstention exception. At a meeting, Ind. Code § 23-1-34-5(d) deems a present director to assent unless an opening objection, minute entry, or timely written dissent or abstention preserves a different record.
Director loans and business opportunities use special procedures
Ind. Code § 23-1-35-3 separately governs a loan or guarantee for a director. It allows either approval by a majority of represented outstanding voting shares, voting as one group without the benefited director's controlled votes, or a board determination that the loan or guarantee benefits the corporation plus approval of the specific transaction or a general plan. Even a violation does not erase the borrower's liability, and special-class statutes can displace the section.
Ind. Code § 23-1-35-5 addresses corporate business opportunities. Before the director becomes legally obligated, the opportunity and all then-known material facts may be disclosed to or known by the board, committee, or shareholders, which may disclaim the corporation's interest through the § 23-1-35-2(c) or (d) procedure. Not using that process does not itself create an inference that the opportunity first belonged to the corporation or alter the otherwise applicable burden of proving a breach.
Narrow statutory effect, separate duties, and records
Ind. Code § 23-1-35-2(a) says a qualifying conflict transaction is not voidable by the corporation solely because of the director's interest. It does not say that disclosure or a vote makes the transaction generally valid, authorized, fair, enforceable, or immune from another claim.
Ind. Code § 23-1-35-1(a), (e) separately states director conduct and liability rules, including good faith, care, best interests, and a willful-misconduct-or- recklessness liability condition. Ind. Code § 23-1-52-1(a), (d) requires permanent records of shareholder and board meetings, action without a meeting, and committee action, in writing or a form reasonably convertible to writing. Those records preserve what happened; they do not establish that every legal condition was met.
What trips people up
Indiana's two counterintuitive counting rules point in different directions. A single noninterested director cannot approve under Ind. Code § 23-1-35-2(c), even if that director is the entire noninterested group. But at the shareholder level, subsection (d) expressly permits the interested director's shares and covered entity shares to count. Applying one body's exclusion instinct to the other body's vote would misstate the statute.
Common questions
Does the conflict statute independently cover an interested officer?
No. Ind. Code § 23-1-35-2 defines the conflict through a corporation's director. An officer role can create a director's indirect interest when that director is an officer of the transaction's other entity and the transaction is or must be considered by the corporation's board, but the section does not create a general officer-conflict procedure.
Can the corporation ratify a completed transaction?
Section 23-1-35-2 repeatedly says "authorized, approved, or ratified," so its text contemplates ratification. It does not supply a separate ratification deadline or state what another authorization, fiduciary, contract, or remedy rule does with a completed transaction.
Does skipping the business-opportunity procedure prove a breach?
No. Ind. Code § 23-1-35-5(d) says failure to use the disclaimer procedure does not create an inference that the opportunity should first have been presented to the corporation or alter the otherwise applicable burden of proving breach. That rule does not decide whether a specific opportunity belonged to the corporation.
Statutes and sources
- Ind. Code § 23-1-20-5 — domestic for-profit corporation definition. Indiana Code 2026, Chapter 20, accessed September 4, 2026.
- Ind. Code § 23-1-29-4(a)-(d) — shareholder written-consent routes, timing, delivery, and effect. Indiana Code 2026, Chapter 29, accessed September 4, 2026.
- Ind. Code §§ 23-1-30-6 to -7 — ordinary shareholder voting-group quorum and approval. Indiana Code 2026, Chapter 30, accessed September 4, 2026.
- Ind. Code §§ 23-1-34-2 and -5 — board consent and meeting assent or abstention. Indiana Code 2026, Chapter 34, accessed September 4, 2026.
- Ind. Code §§ 23-1-35-1 to -3 and -5 — director duties, conflict transactions, loans, and business opportunities. Indiana Code 2026, Chapter 35, accessed September 4, 2026.
- Ind. Code § 23-1-52-1(a), (d) — permanent meeting, consent, and committee records. Indiana Code 2026, Chapter 52, accessed September 4, 2026.
Source links
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