Corporate Interested-Director Transaction Requirements in Louisiana

At a glance

Requirements one by one

The conflict subpart covers proposed and completed director transactions

La. R.S. § 12:1-101 names Chapter 1 as the Business Corporation Act, and § 12:1-140(4) defines the domestic corporation as a nonforeign for-profit corporation incorporated under or subject to that chapter.

Section 12:1-860(2) reaches a proposed or effected transaction by that corporation or an entity it controls 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. Subpart F's ordinary conflict rule names directors, not officers who are not also directors.

Control, related persons, and qualification are fact-specific

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, listed governing and fiduciary roles, employers, and a person with whom the director has a material relationship. Section 12:1-143 defines that relationship by expected impaired objectivity and excludes both the conflicted director and a materially related director from qualified status. The statute does not classify a real relationship from its title alone.

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 related-person branches in § 12:1-860(5)(e), (f), or (g), § 12:1-862(B) 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 must still disclose all nonviolative information, the conflict, and the nature of the nondisclosure duty.

The shareholder route adds transaction-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 12:1-862 does not add a 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 those qualified shares, so the quorum denominator is not limited to the shares that appear and vote.

Qualified shares exclude shares held by the conflicted director and related persons, except the employer branch in § 12:1-860(5)(f). “Holder” includes record and beneficial shareholders and unrestricted voting-trust beneficial shareholders. Presence or voting by nonqualified shares does not affect an otherwise compliant action, subject to the statutory cure provision.

Conflict approval may not complete ordinary authorization

Sections 12:1-862(D) and 12:1-863(F) expressly preserve an independent action when the conflict vote does not meet an articles, bylaws, or other-law quorum or vote requirement for transaction authorization. Nonqualified directors or shares may participate in that separate action.

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 12:1-861(B)(3) 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 line up automatically

The conflict procedure requires qualified directors to deliberate and vote outside every other director's presence and participation. Section 12:1-821, however, generally requires each director to sign a consent and delivery of consents signed by all directors for action without a meeting.

Unlike statutes that expressly permit a conflicted director to sign or abstain from the conflict consent, Louisiana's Subpart F states no special no-meeting route. The conflict procedure and any ordinary written authorization therefore must each be satisfied on their own terms.

Officers appear in the separate business-opportunity rule

Section 12:1-870 separately covers a business opportunity pursued by a director, officer, or either one's related person. Before becoming legally obligated, the person may bring it to the corporation for a qualified-director disclaimer under § 12:1-862 or a qualified-share disclaimer under § 12:1-863. An articles provision may instead limit or eliminate the offer duty, with qualified-director action required to apply it to officers and their related persons.

Section 12:1-811 also lets the board fix director compensation unless the articles or bylaws provide otherwise. Neither provision converts the ordinary director-conflict subpart into a general officer or compensation safe harbor.

The statutory effect is ground-specific

Under § 12:1-861(B), 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. Subsection A uses broader “any form of relief” language when the transaction is not a director's conflicting-interest transaction. The statute does not declare every transaction authorized, valid, fair, or immune from another ground.

Section 12:1-1601 requires permanent shareholder, board, and committee meeting and no-meeting action records in document or paper-convertible form. A record documents procedure without proving disclosure, qualification, fairness, or compliance.

What trips people up

Qualified-director approval is not simply a vote that omits the conflicted director. It needs at least two qualified directors, a qualified-only deliberation and vote outside every other director's presence, and special committee composition when a committee acts.

The shareholder vote's majority-of-votes-cast approval formula does not reduce its quorum. A majority of all voting power held by qualified shares still must be represented.

Common questions

May the conflicted director remain during the qualified vote?

No. Section 12:1-862(A)(1) requires qualified directors to deliberate and vote outside the presence of and without participation by every other director.

Do the ordinary rules cover an officer who is not a director?

Subpart F defines a director's conflicting-interest transaction. Officers and their related persons are expressly included in the separate business- opportunity route in § 12:1-870.

Does approval prove that the transaction is fair?

No. Approval and established fairness are alternative routes in § 12:1-861(B), and the statutory protection is limited to relief on the ground of the director's interest.

Can nonqualified shares vote at all?

Their presence or voting does not affect an otherwise compliant conflict vote, but they do not count as qualified shares. They may participate in a separate authorization action required by governing documents or another law.

Statutes and sources

• La. R.S. §§ 12:1-101 and 12:1-140(4) — Act name and domestic-corporation scope. Official Louisiana Legislature section 12:1-101 and section 12:1-140, accessed September 4, 2026.
• La. R.S. § 12:1-143 — qualified director, material interest, and material relationship. Official Louisiana Legislature text, accessed September 4, 2026.
• La. R.S. §§ 12:1-811 and 12:1-821 — director compensation and board consent. Official Louisiana Legislature section 12:1-811 and section 12:1-821, accessed September 4, 2026.
• La. R.S. §§ 12:1-860 through 12:1-863 — definitions, judicial effect, qualified-director action, and qualified-share action. Official Louisiana Legislature section 12:1-860, section 12:1-861, section 12:1-862, and section 12:1-863, accessed September 4, 2026.
• La. R.S. § 12:1-870 — business opportunities. Official Louisiana Legislature text, accessed September 4, 2026.
• La. R.S. § 12:1-1601 — permanent corporate action records. Official Louisiana Legislature text, accessed September 4, 2026.