Corporate Interested-Director Transaction Requirements in Michigan
At a glance
| Governing law, entity, transaction, and covered-person scope | Michigan Business Corporation Act, Act 284 of 1972; ordinary domestic corporation. Applies when director or officer is determined to have interest in transaction; no proposed-transaction, subsidiary, controlled-entity, or related-person scope stated in § 450.1545a (§§ 450.1101, .1106(1), .1545a(1)) |
|---|---|
| Interest, relationship, control, and materiality definitions | Core section does not define interest, direct/indirect interest, related person, control, or disinterested. 'Independent director' is separately defined by election/designation, experience, relationship/transaction, family/affiliate, prospective-relationship, and service-duration conditions (§§ 450.1107(3), .1545a) |
| Required disclosure, facts, timing, knowledge, and recipients | Material facts of transaction and director/officer interest disclosed to or known by board, committee, independent director(s), or shareholders entitled to vote before authorization, approval, or ratification; fairness route has no disclosure predicate and section states no special written/confidential/tabulator disclosure (§ 450.1545a(1)(b)-(c)) |
| Disinterested or qualified board/committee composition, quorum, vote, and good faith | Affirmative majority of board/committee directors with no interest, though below quorum, OR all independent directors with no interest. Interested presence/vote does not affect otherwise compliant action. No minimum voter count, good-faith condition, committee-composition formula, or mandatory deliberation exclusion stated (§ 450.1545a(1)(b), (2)) |
| Disinterested shareholder notice, voting group, quorum, consent, and threshold | Majority of votes cast by shareholders with no interest after disclosure/knowledge; majority of shares held by no-interest shareholders forms special quorum. Section does not prescribe related-person attribution, voting groups, written-consent formula, or separate ordinary-authorization treatment (§ 450.1545a(1)(c), (3)) |
| Fairness alternative, relevant time, burden, and statutory standard | Interested person must establish transaction was fair to corporation when entered. Section gives no fairness element list; satisfaction does not preclude other claims, which use principles applicable to no-interest transaction (§ 450.1545a(1)(a), (4)) |
| Interested-person presence, participation, vote, abstention, and written consent | Interested director presence/vote does not affect validity of otherwise compliant board route; approval still requires no-interest majority/all independent no-interest directors. Ordinary board/committee no-meeting action requires all members' written/electronic consent filed with minutes; no conflict-abstention consent route stated (§§ 450.1525(1)-(2), .1545a(2)) |
| Controlling stockholders, officers, compensation, and special transaction routes | Express officer coverage. No controlling-stockholder, going-private, loan, or public-company branch. Board majority in office may set reasonable director compensation irrespective of personal interest, subject to required shareholder approval; no sanction unless compensation shown unreasonable when established (§ 450.1545a(1), (5)) |
| Statutory effect, remedies, records, fiduciary, and public-company boundaries | No injunction, set-aside, damages, or other sanctions because of interest if interested person establishes route; other transaction claims expressly preserved/evaluated under no-interest principles. Corporation keeps shareholder/board/executive-committee minutes in written/convertible form; consents filed with minutes. Independent authorization, fairness, fiduciary, securities, public-company, enforcement, and other remedies remain (§§ 450.1485, .1525(2), .1545a(1), (4)) |
Requirements one by one
Governing law, entity, transaction, and covered-person scope
Mich. Comp. Laws §§ 450.1101 and 450.1106(1) identify the Michigan Business Corporation Act and its domestic corporation. Mich. Comp. Laws § 450.1545a applies when a director or officer is determined to have an interest in a transaction.
The section does not define the interest, direct or indirect interest, related person, control, or disinterested status. It also does not state a special subsidiary, controlled-entity, controlling-stockholder, or going-private route, so those features cannot be read into its sparse trigger.
The interested person must establish a statutory route
Section 450.1545a(1) puts the threshold on the person interested in the transaction. That person must establish fairness when the deal was entered, informed board/committee/independent-director approval, or informed shareholder approval. A recital or unexplained vote is not a substitute for that record.
For either approval route, the material transaction facts and the director's or officer's interest must be disclosed to or known by the deciding group. The section states no modified confidentiality or tabulator-disclosure route.
No-interest board, committee, and independent-director approval
The board or committee route requires an affirmative majority of the directors who have no interest, even when that group is below an ordinary quorum. As an alternative, every independent director who has no interest can approve. Interested presence or voting does not affect the validity of otherwise compliant action, but it does not make that vote part of the no-interest majority.
Mich. Comp. Laws § 450.1107(3) defines an independent director through election, formal designation, experience, recent employment and transaction exclusions, affiliate and family limits, prospective relationships, and a service-duration cap. “Independent” cannot be inferred from the director's title alone.
No-interest shareholder approval
The shareholder route requires a majority of votes cast by holders who have no interest in the transaction. A majority of the shares held by no-interest shareholders forms its special quorum. The section does not provide a separate related-person attribution rule, voting-group formula, or written shareholder- consent procedure for this conflict route.
Fairness at the time entered
The fairness alternative asks whether the transaction was fair to the corporation when entered. Section 450.1545a gives no element list, valuation method, or arm's-length comparison. The interested person must establish the route, but this cell does not decide what evidence meets that burden.
Presence, vote, and written board consent
Subsection (2) says an interested director's presence or vote does not affect otherwise compliant no-interest-director action. Mich. Comp. Laws § 450.1525(1)-(2) separately makes ordinary no-meeting action unanimous among all board or committee members and accepts written or electronic consent filed with the minutes. The conflict section states no special abstention mechanism for that consent route.
Director compensation has its own rule
Section 450.1545a(5) lets a majority of directors in office establish reasonable director compensation for service as director or officer irrespective of their personal interests, unless the articles, bylaws, or Act require shareholder approval. The compensation transaction avoids the stated remedies unless shown unreasonable when established. That special branch does not govern every interested transaction.
Statutory effect and preserved claims
When the interested person establishes a subsection (1) route, the transaction cannot be enjoined, set aside, or support damages or other sanctions because of the interest. Subsection (4) expressly preserves other claims relating to the transaction and directs that they be evaluated under principles applicable to a transaction without an interested director or officer.
The provision therefore does not decide independent authorization, governing- document compliance, fiduciary duties, securities law, fairness, enforceability, or another remedy. Its stated interest-based effect is not a universal validity declaration.
Records and external boundaries
Mich. Comp. Laws § 450.1485 requires shareholder, board, and executive-committee minutes in writing or a reasonably convertible form. Section 450.1525 places board and committee consents with the minutes. Those records can preserve disclosure and voting, but cannot by themselves prove interest, independence, fairness, authority, or satisfaction of another claim.
What trips people up
Michigan has two distinct no-interest director formulas: a majority of the board or committee directors with no interest, even below quorum, or all independent directors who have no interest. “All” modifies the second route.
Compliance also does not end the analysis. Subsection (4) expressly preserves other claims and removes the interest only from how those claims are evaluated.
Common questions
Does the statute cover officers who are not directors?
Yes. Section 450.1545a(1) expressly covers a transaction in which a director or officer is determined to have an interest.
Does an interested director's vote invalidate board approval?
Not by itself. Subsection (2) says presence or a vote does not affect otherwise compliant action, while the approval formula still counts only the no-interest majority or all no-interest independent directors.
Does satisfying § 450.1545a eliminate other claims?
No. Subsection (4) expressly preserves other claims concerning the transaction.
Statutes and sources
- Mich. Comp. Laws §§ 450.1101, 450.1106, and 450.1107 — Act, corporation, and independent-director definitions. Official Act 284 PDF, accessed September 4, 2026.
- Mich. Comp. Laws § 450.1525 — board and committee written consent. Official section text, accessed September 4, 2026.
- Mich. Comp. Laws § 450.1545a — conflict routes, votes, quorum, preserved claims, compensation, and statutory effect. Official section text, accessed September 4, 2026.
- Mich. Comp. Laws § 450.1485 — corporate minutes and record form. Official section text, accessed September 4, 2026.
Source links
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