Corporate Interested-Director Transaction Requirements in Massachusetts
At a glance
| Governing law, entity, transaction, and covered-person scope | G.L. c. 156D, § 8.31; transaction with corporation in which corporation director has material direct/indirect interest. Ordinary route names directors, not officers, related persons, subsidiaries, or controlled entities (§ 8.31(a)) |
|---|---|
| Interest, relationship, control, and materiality definitions | Material direct interest is trigger but undefined. Indirect interest nonexclusive: other party is entity where director has material financial interest/general-partner status, or entity where director holds director/officer/trustee/other position and transaction is/should be board-considered. No related-person/control definition (§ 8.31(a)-(b)) |
| Required disclosure, facts, timing, knowledge, and recipients | Material transaction facts 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 discloser, written form, confidential-information, or separate timing rule stated (§ 8.31(a)(1)-(3)) |
| Disinterested or qualified board/committee composition, quorum, vote, and good faith | Affirmative majority of directors on board/committee having no direct/indirect interest; one director alone cannot approve. Approval by that majority creates special quorum. Interested presence/vote does not affect otherwise compliant action; one director alone cannot approve (§ 8.31(c)) |
| Disinterested shareholder notice, voting group, quorum, consent, and threshold | Majority of shares entitled to count; same eligible-share majority, whether present or not, is special quorum. Excludes shares owned/vote-controlled by interested director and entity where director has material financial interest/general-partner status; excluded votes count for other Chapter approval. No class/voting-group formula in § 8.31(d) |
| Fairness alternative, relevant time, burden, and statutory standard | Separate route if transaction was fair to corporation. Section states no measurement time, fairness definition, factor list, or burden allocation (§ 8.31(a)(3)) |
| Interested-person presence, participation, vote, abstention, and written consent | Interested presence/vote does not affect validity of otherwise compliant board action, while approval majority remains no-interest directors. Ordinary no-meeting board action requires every director's written/electronic consent; no special conflict abstention route. General shareholder consent has meeting-vote effect but must still satisfy eligible-share procedure (§§ 7.04, 8.21, 8.31(c)-(d)) |
| Controlling stockholders, officers, compensation, and special transaction routes | No ordinary officer, controlling-stockholder, going-private, loan, corporate-opportunity, or public-company conflict branch in § 8.31. Board generally fixes director compensation unless articles/bylaws provide otherwise (§ 8.11) |
| Statutory effect, remedies, records, fiduciary, and public-company boundaries | Satisfied route makes transaction not voidable by corporation solely for director interest. Permanent shareholder/board meeting, no-meeting, and delegated-committee records required. Section states no damages, injunction, burden, fiduciary, securities, public-company, authorization, or other-remedy effect (§§ 8.31(a), 16.01(a), (d)) |
Requirements one by one
The trigger is a material direct or indirect director interest
Mass. Gen. Laws ch. 156D, § 8.31(a) covers a transaction with the corporation in which one of its directors has a material direct or indirect interest. The section does not define direct or material interest or prescribe a general officer, related-person, controlled-entity, controlling-stockholder, or public- company conflict route.
The indirect-interest examples are expressly nonexclusive. They include a transaction with another entity in which the director has a material financial interest or is a general partner. They also include another entity where the director is a director, officer, trustee, or holds another position when the transaction is or should be considered by the corporation's board.
Each approval route requires the full stated disclosure
For either board/committee or shareholder action, the material transaction facts and the director's interest must be disclosed or known to the deciding group before authorization, approval, or ratification. The section does not name the discloser, require a written form, prescribe a fixed timing interval, or create a modified confidential-information route.
Fairness is a separate alternative without an express disclosure predicate in § 8.31(a)(3). That does not establish that disclosure is immaterial under fiduciary, securities, governing-document, or other law outside this section.
No-interest director approval requires at least two directors
Section 8.31(c) requires an affirmative majority of the board or committee directors who have no direct or indirect interest. One director alone cannot authorize, approve, or ratify under the section. Approval by the no-interest majority also creates the special conflict-purpose quorum.
An interested director's presence or vote does not affect otherwise compliant action, but that vote is not part of the no-interest majority. The no-interest majority remains necessary even when an interested director is present.
Eligible-share approval uses a majority of shares, not votes cast
Section 8.31(d) requires the vote of a majority of the shares entitled to be counted. A majority of those eligible shares, whether present or not, forms the special quorum.
Shares owned by or vote-controlled by the interested director cannot count. Neither can shares owned by or vote-controlled by an entity in which the director has a material financial interest or is a general partner. Those shares still count for approvals required elsewhere in Chapter 156D, so the conflict vote does not replace an independent transaction-authorization vote.
Fairness is a separate merits alternative
The third route applies when the transaction was fair to the corporation. Section 8.31 gives no measurement time, factor list, valuation method, or express burden allocation, and this cell does not decide whether a transaction is fair.
Board and shareholder consent follow the general statutes
Mass. Gen. Laws ch. 156D, § 8.21 defaults no-meeting board action to unanimous director consent unless the articles or bylaws require a meeting. Written or electronic consents must follow the delivery and record requirements, and the last consent ordinarily fixes effectiveness. The conflict section creates no special interested-director abstention or non-signature route.
Mass. Gen. Laws ch. 156D, § 7.04 defaults shareholder consent to unanimity but allows the meeting minimum when the articles permit it. A consent has meeting- vote effect, but the § 8.31 eligible-share and disclosure rules still apply. For less-than-unanimous action, current law requires notice to nonconsenting voting shareholders at least seven days before action.
Compensation is a separate general board power
Mass. Gen. Laws ch. 156D, § 8.11 generally lets the board fix director compensation unless the articles or bylaws provide otherwise. That sentence does not supply § 8.31's conflict-disclosure and no-interest-approval record.
The statutory effect is narrow
A conflict transaction satisfying one § 8.31(a) route is not voidable by the corporation solely because of the director's interest. The section does not state a separate effect for injunction, damages, burden allocation, fiduciary duties, securities law, independent authorization, governing documents, or another remedy.
Mass. Gen. Laws ch. 156D, § 16.01 requires permanent minutes of shareholder and board meetings plus permanent records of shareholder, board, and delegated- committee no-meeting action. The record alone does not establish interest, disclosure, vote eligibility, quorum, fairness, or satisfaction of another claim.
What trips people up
The director and shareholder routes use different denominators. The board route needs a majority of no-interest directors and an absolute two-director floor. The shareholder route needs a majority of eligible shares, with a matching majority-share quorum whether those shares are present or not.
Pending H.3323 would rewrite the shareholder denominator and current consent- notice timing, but its proposed text is not current law. The current sections and the pending entry above remain separate.
Common questions
May one disinterested director approve the transaction?
No. Section 8.31(c) expressly bars approval by a single director.
Do shares controlled by the interested director count?
Not for the § 8.31(d) conflict vote. They do count when determining whether the transaction receives approval required under other Chapter 156D sections.
Does compliance establish universal validity?
No. The statute says only that the transaction is not voidable by the corporation solely because of the director's interest. Independent authority, governing documents, fiduciary duties, securities law, and other claims or remedies remain outside that statement.
Statutes and sources
- Mass. Gen. Laws ch. 156D, § 8.31 — conflict trigger, indirect interests, disclosure, board and shareholder routes, fairness, quorum, vote, and statutory effect. Official current section, accessed September 4, 2026.
- Mass. Gen. Laws ch. 156D, §§ 7.04 and 8.21 — shareholder and director action without a meeting. Official shareholder-consent section and official director-consent section, accessed September 4, 2026.
- Mass. Gen. Laws ch. 156D, § 8.11 — director compensation. Official current section, accessed September 4, 2026.
- Mass. Gen. Laws ch. 156D, § 16.01 — permanent corporate action records. Official current section, accessed September 4, 2026.
Source links
Every statute quoted above, linked, with the date we checked it.
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