Corporate Interested-Director Transaction Requirements in Iowa

At a glance

Requirements one by one

The conflict part covers proposed controlled-entity transactions

Iowa Code § 490.101 names Chapter 490 as the Iowa Business Corporation Act, and § 490.140(6) defines a domestic business corporation as a nonforeign for-profit corporation incorporated under the chapter. Section 490.860 reaches an effected or proposed transaction by that corporation or an entity it controls.

The transaction is conflicting when, at the relevant time, a director is a party, knowingly has a known material financial interest, or knows a related person is a party or materially interested. The ordinary conflict part names directors rather than officers who are not also directors.

Control, related persons, and qualification are defined

Control includes majority power to elect or remove an entity's governing body and a separate majority-economic-risk-or-return branch. A material financial interest is one reasonably expected to impair the director's objective judgment in the authorization decision.

The related-person definition reaches specified family and household members, controlled entities, governing and fiduciary roles, and employers. Iowa Code § 490.143 excludes the conflicted director and a materially related director from qualified status. A real relationship requires the underlying facts.

Required and modified disclosure differ

Required disclosure includes the conflict's existence and nature and all facts known to the director that a conflict-free director would reasonably believe material to deciding whether to proceed. The board route needs disclosure of information the qualified directors do not already know.

For conflicts arising only through the governing/fiduciary or employer related- person branches, § 490.862(2) permits modified disclosure when the conflicted director reasonably believes full disclosure would violate law, an enforceable confidentiality obligation, or a professional-ethics rule. The director still must disclose all nonviolative information, the conflict, and the nature of the nondisclosure duty.

The shareholder route adds action notice, communication of required disclosure not already known, and a written pre-vote statement to the secretary or tabulator identifying known nonqualified shares and their holders.

Qualified directors act without every other director

The board route requires an affirmative majority of qualified directors voting, but never fewer than two. Those directors must deliberate and vote outside the presence of and without participation by every other director.

An approving committee must consist only of qualified directors and include either every qualified board director or members appointed by a qualified- director majority. A majority, but no fewer than two, of all qualified board or committee directors creates the special conflict quorum. Section 490.862 states no separate good-faith condition.

Qualified shares use different quorum and approval denominators

Shareholder approval requires a majority of votes cast by holders of qualified shares. The quorum is a majority of all votes entitled to be cast by qualified shares, so the two denominators differ.

Qualified shares exclude shares held by the conflicted director and related persons, except the employer branch in § 490.860(5)(f). Holders include record and beneficial shareholders and unrestricted voting-trust beneficial owners. Nonqualified-share presence or voting does not affect otherwise compliant action, subject to the narrow identification-failure cure.

Conflict approval may not complete ordinary authorization

Sections 490.862(4) and 490.863(6) preserve an independent action when the conflict vote does not meet an articles, bylaws, or other-law quorum or vote requirement. Nonqualified directors or shares may participate in that separate authorization.

Fairness is defined and tied to the relevant time

Fairness asks whether the transaction as a whole was beneficial to the corporation, appropriately accounting for fair director dealings and comparison with what might have been obtainable at arm's length given the consideration. Relevant time is the compliant board-action time or, absent such action, when the corporation or controlled entity becomes legally obligated to close.

Section 490.861(2)(c) says fairness must be established but does not expressly name who carries that burden. This cell does not add a burden rule from outside the statute.

Meeting exclusion and unanimous consent do not align automatically

The conflict procedure requires qualified directors to deliberate and vote outside every other director's presence. Section 490.821, however, generally requires every director to sign and deliver a consent for action without a meeting.

Part 6 states no special conflicted-director signature or abstention route. The conflict procedure and ordinary written authorization therefore must each be satisfied on their own terms.

Officers appear in the separate business-opportunity rule

Section 490.870 separately covers a business opportunity pursued by a director or officer. Before becoming legally obligated, the person may bring it to the corporation for a qualified-director disclaimer under § 490.862 or a qualified- share disclaimer under § 490.863. An articles provision may instead limit or eliminate the offer duty, with qualified-director action where required.

Section 490.811 also lets the board fix director compensation unless the articles or bylaws provide otherwise. Neither provision creates a general officer-conflict route in Part 6.

The statutory effect is ground-specific

Under § 490.861, a compliant route bars equitable relief, director damages, or other sanctions in the named shareholder or corporate proceeding on the ground of the director's interest. The same ground-specific protection applies if the transaction is not a director's conflicting-interest transaction. Neither rule declares every transaction authorized, valid, fair, or immune from another ground.

Section 490.1601 requires meeting and no-meeting action records for shareholders, the board, and board committees. A record documents process without proving disclosure, qualification, fairness, or compliance.

What trips people up

The board route needs at least two qualified directors and excludes every other director from deliberation and voting. The shareholder route instead uses a votes-cast approval threshold paired with an all-qualified-voting-power quorum.

Common questions

May the conflicted director remain during the qualified vote?

No. Section 490.862 requires qualified directors to deliberate and vote outside the presence of and without participation by every other director.

Does the ordinary conflict part cover an officer who is not a director?

Part 6 defines a director's conflicting-interest transaction. Officers are expressly included in the separate business-opportunity provision.

Is a majority of qualified-share votes cast enough by itself?

No. The action also requires a majority-of-qualified-voting-power quorum plus the notice, required disclosure, and holder-identification predicates.

Does approval prove the transaction is fair?

No. Qualified-director approval, qualified-share approval, and established fairness are alternative statutory routes.

Statutes and sources

• Iowa Code §§ 490.101, 490.140(6), and 490.143 — Act scope, domestic corporation, qualified director, and material relationship.
• Iowa Code §§ 490.811 and 490.821 — compensation and written board action.
• Iowa Code §§ 490.860 through 490.863 — conflict definitions, judicial effect, qualified-director action, and qualified-share action.
• Iowa Code § 490.870 — business opportunities.
• Iowa Code § 490.1601(1)(e) — corporate action records.

All are in the official Iowa Code 2026 Chapter 490 PDF, accessed September 4, 2026. Currency was also checked against the official 2026 Code & Acts Sections Amended report, accessed September 4, 2026.