Corporate Interested-Director Transaction Requirements in Kentucky
At a glance
| Governing law, entity, transaction, and covered-person scope | Kentucky Business Corporation Act, ch. 271B; domestic for-profit corporation. Covers transaction with corporation involving corporate director's direct/indirect interest; section names directors, not a general officer-conflict route (§§ 271B.1-010, 271B.1-400(5), 271B.8-310(1)) |
|---|---|
| Interest, relationship, control, and materiality definitions | Indirect interest if other party is entity where director has material financial interest/general-partner status, or entity where director is director/officer/trustee and transaction is or should be board-considered. No materiality, related-person, control, or independence definition (§ 271B.8-310(2)) |
| Required disclosure, facts, timing, knowledge, and recipients | Material facts of transaction and director's interest disclosed to or known by board/committee or shareholders entitled to vote before authorization, approval, or ratification. Fairness route has no disclosure predicate; no special writing, confidentiality, director-source, tabulator, or timing rule stated (§ 271B.8-310(1)) |
| Disinterested or qualified board/committee composition, quorum, vote, and good faith | Affirmative majority of directors on board/committee without direct/indirect interest; never one director alone. That majority creates conflict quorum. No good-faith, qualified-only committee, selection, or exclusion-from-deliberation condition stated (§ 271B.8-310(3)) |
| Disinterested shareholder notice, voting group, quorum, consent, and threshold | Majority of shares entitled to count; same eligible-share majority is conflict quorum. Excludes shares owned/vote-controlled by interested director or material-interest/general-partner entity; excluded shares count for other Chapter approval (§ 271B.8-310(2), (4)) |
| Fairness alternative, relevant time, burden, and statutory standard | Separate route if transaction was fair to corporation. Section states no measurement time, fairness definition, elements, or burden allocation; do not infer them (§ 271B.8-310(1)(c)) |
| Interested-person presence, participation, vote, abstention, and written consent | Interested director's presence/vote does not affect otherwise compliant board action, but cannot supply no-interest approving majority. General no-meeting action requires all board members to act and each director to sign; no conflict-specific abstention route stated (§§ 271B.8-210, 271B.8-310(3)) |
| Controlling stockholders, officers, compensation, and special transaction routes | No controlling-stockholder, going-private, corporate-opportunity, or general officer route stated. Board may fix director compensation unless governing records say otherwise; director loan/guarantee uses benefited-share exclusion or corporate-benefit board determination and approval (§§ 271B.8-110, 271B.8-310, 271B.8-320) |
| Statutory effect, remedies, records, fiduciary, and public-company boundaries | Satisfied route makes transaction not voidable by corporation solely because of director interest; unlawful loan does not affect borrower/corporation liability. Permanent meeting and no-meeting action records required. Other authorization, governing-document, fiduciary, securities, enforcement, and remedy questions remain (§§ 271B.8-310(1), 271B.8-320(2), 271B.16-010) |
Requirements one by one
The statute covers a domestic corporation's director transaction
Ky. Rev. Stat. § 271B.1-010 names Chapter 271B as the Kentucky Business Corporation Act. Under § 271B.1-400(5), “corporation” or “domestic corporation” means a corporation for profit, which is not a foreign corporation, incorporated under or subject to that chapter; the definition includes professional-service and public-benefit corporations.
Section 271B.8-310(1) covers a transaction with the corporation in which one of its directors has a direct or indirect interest. It names directors rather than creating a general officer-conflict, related-person, or controlling-stockholder procedure.
Indirect interests use two entity branches
The director has an indirect interest if the other party is an entity in which the director has a material financial interest or serves as general partner. A second branch covers another entity for which the director is a director, officer, or trustee when the transaction is or should be considered by the corporation's board.
Section 271B.8-310 does not define materiality, related person, control, disinterestedness, or independence. A real relationship cannot be classified from its title alone.
Board approval needs a no-interest majority and more than one director
The material facts of both the transaction and the director's interest must be disclosed to or known by the board or committee. Approval then requires an affirmative majority of the directors on that body without a direct or indirect interest.
Kentucky expressly bars approval by a single director. When the required no- interest majority approves, that majority establishes the special conflict quorum. The section states no separate good-faith condition, qualified-only committee selection rule, or requirement that the interested director leave the deliberation.
Eligible-share approval excludes only specified shares
The material transaction and interest facts likewise must be disclosed to or known by shareholders entitled to vote. Approval requires a majority of shares entitled to count, and the same eligible-share majority constitutes the special conflict quorum.
The calculation excludes shares owned or vote-controlled by the interested director and by an entity in which the director has a material financial interest or serves as general partner. It does not expressly exclude the shares of the separate entity for which the director merely serves as director, officer, or trustee. Excluded shares still count when another Chapter 271B provision independently requires transaction approval.
Fairness is a sparse alternative
Fairness to the corporation is a separate route. Section 271B.8-310 does not define the standard, identify a measurement time, state elements, or allocate a burden. This cell does not fill those gaps from outside the statute.
Presence, vote, and written consent are separate questions
An interested director's presence or vote does not invalidate an otherwise compliant no-interest-director approval under § 271B.8-310(3). That vote still cannot supply the required approving majority.
For ordinary action without a meeting, § 271B.8-210 requires all board members to take the action and each director to sign a written consent unless the articles or bylaws provide otherwise. Section 271B.8-310 states no special conflict abstention or omitted-signature mechanism.
Compensation and director loans have separate text
Section 271B.8-110 permits the board to fix director compensation unless the articles or bylaws provide otherwise. It does not state that compensation is automatically outside the conflict provision.
Section 271B.8-320 separately permits a director loan or guarantee if the outstanding voting-share majority approves without benefited-director shares, or if the board determines the loan or guarantee benefits the corporation and approves the specific transaction or a general plan. A violation does not eliminate the borrower's loan liability or the corporation's guarantee liability.
The statutory effect is narrow, and the process leaves records
Satisfying one § 271B.8-310(1) route makes the transaction not voidable by the corporation solely because of the director's interest. Those limiting words do not resolve independent authorization, governing-document, fiduciary, securities, fairness, enforcement, or other-remedy questions.
Section 271B.16-010 requires permanent shareholder, board, and committee meeting and no-meeting action records in written or reasonably convertible form. A record documents the process; it does not by itself prove disclosure, disinterestedness, fairness, or compliance.
What trips people up
The board route cannot be approved by one director even if that director is the only person without a conflict. The shareholder exclusion also does not track both indirect-interest branches: it points to the material-financial-interest or general-partner entity, not the common-office entity.
Common questions
May an interested director attend or vote?
Section 271B.8-310(3) says the director's presence or vote does not affect an otherwise compliant action. The approving majority must still consist of more than one director without a direct or indirect interest.
Does approval prove that the transaction is fair?
No. Board approval, shareholder approval, and fairness are alternative routes, and the statutory effect is limited to voidability by the corporation solely because of the director's interest.
Does the statute assign the fairness burden?
No allocation appears in § 271B.8-310. It also does not define fairness or state when it is measured.
Does the ordinary conflict section cover an officer who is not a director?
No general officer route appears in § 271B.8-310. The indirect-interest definition can consider a director's officer role at the other transaction party, but the conflicted person under the provision remains a director of the corporation.
Statutes and sources
- Ky. Rev. Stat. §§ 271B.1-010 and 271B.1-400(5) — Act name and domestic-corporation definition. Official Kentucky Legislature §§ 271B.1-010 and 271B.1-400, accessed September 4, 2026.
- Ky. Rev. Stat. §§ 271B.8-110 and 271B.8-210 — compensation and written board action. Official Kentucky Legislature §§ 271B.8-110 and 271B.8-210, accessed September 4, 2026.
- Ky. Rev. Stat. § 271B.8-310 — conflict definition, disclosure, board and shareholder approvals, fairness, quorum, exclusions, and statutory effect. Official Kentucky Legislature text, accessed September 4, 2026.
- Ky. Rev. Stat. § 271B.8-320 — director loans and guarantees. Official Kentucky Legislature text, accessed September 4, 2026.
- Ky. Rev. Stat. § 271B.16-010 — permanent corporate action records. Official Kentucky Legislature text, accessed September 4, 2026.
Source links
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