Corporate Interested-Director Transaction Requirements in New Jersey

At a glance

Requirements one by one

The statute covers two forms of director conflict

N.J.S.A. § 14A:6-8(1) covers a contract or other transaction between the corporation and one or more directors. It also covers a transaction with a domestic or foreign corporation, firm, or association in which one of the corporation's directors is also a director or is otherwise interested.

The provision does not define “otherwise interested,” disinterested, materiality, related persons, control, or indirect interests. It names directors rather than prescribing a general conflict route for officers, controlling stockholders, or public companies.

Disclosure follows the chosen approval route

For board or committee action, the fact of the common directorship or interest must be disclosed to or known by the board or committee. For shareholder action, that fact must be disclosed to or known by the shareholders. The section does not say who must make the disclosure, when it must occur, or that all material transaction facts must also be provided.

The fair-and-reasonable alternative has no disclosure predicate in the text. That does not establish that disclosure is immaterial under fiduciary, securities, governing-document, or other law outside this section.

Meeting approval and written consent use different formulas

At a meeting, approval requires an affirmative majority of the disinterested directors. That group may be less than an ordinary quorum. The section does not add a two-director floor, good-faith recital, committee-selection rule, or express exclusion of interested directors from deliberation.

The conflict statute also creates its own written-consent route. Every director must consent in writing, but only one consenting director must be disinterested. This is different from requiring every signer to be disinterested.

Interested directors may count toward a meeting quorum

Subsection (1) removes sole-reason voidability based on interested-director presence or counted votes when one statutory route is satisfied. Subsection (2) also permits common or interested directors to count toward the board or committee quorum.

Those rules do not change the meeting-approval numerator: subsection (1)(b) still requires the affirmative vote of a majority of the disinterested directors. Nor do they establish that participation is advisable or that independent fiduciary or governing-document requirements have been met.

Shareholder approval uses the general voting framework

Section 14A:6-8(1)(c) requires disclosure or knowledge and shareholder authorization, approval, or ratification, but it does not exclude interested shares or create a conflict-specific quorum or threshold. The general default in § 14A:5-9 is a quorum of shares entitled to cast a majority of the votes. N.J.S.A. § 14A:5-11 ordinarily requires a majority of votes cast by holders entitled to vote, subject to a greater certificate or statutory requirement and any applicable class vote.

Section 14A:5-6 separately permits non-election shareholder action through written consents carrying the meeting minimum, unless the certificate requires otherwise. The consents or inspectors' report must be filed with the shareholder minutes and have the same effect as meeting action. The conflict section adds no special exclusion of interested shares to that route.

Fair and reasonable is an alternative at the approval time

The merits alternative asks whether the contract or transaction was fair and reasonable to the corporation when authorized, approved, or ratified. The statute gives no valuation method, factor list, arm's-length comparator, or express burden allocation, and this cell does not decide whether the standard is met.

Director compensation follows a separate subsection

Section 14A:6-8(3) gives the board authority, by an affirmative majority of directors in office and irrespective of personal interest, to establish reasonable director compensation for services as directors, officers, or otherwise. That branch does not make officers covered persons for every contract or transaction under subsection (1).

The effect is limited to the reasons the statute names

A transaction satisfying one subsection (1) route is not void or voidable solely because of the common directorship or interest, interested-director presence, or counted votes. Section 14A:6-8 does not declare the transaction independently authorized, valid for every purpose, enforceable, advisable, or immune from fiduciary, governing-document, securities, or other claims and remedies.

What trips people up

The special board written-consent formula is not a unanimous-disinterested formula. It requires unanimous written consent by the board or committee and at least one disinterested consenting director.

At a meeting, by contrast, interested directors may count toward quorum, but the conflict-approval vote still comes from a majority of the disinterested directors. Counting a vote for the statute's limited sole-reason effect is not the same as counting it in that approval majority.

Common questions

Must the board route use a full ordinary quorum of disinterested directors?

No. Section 14A:6-8(1)(b) expressly permits a majority of the disinterested directors to approve even when they are less than a quorum.

Does shareholder approval exclude shares connected to the interested director?

Not under § 14A:6-8. The section states no conflict-specific share exclusion; the ordinary quorum, vote, class, and written-consent rules still require a review of the Act and the corporation's current certificate.

Does compliance establish that the transaction is valid for every purpose?

No. The statute only removes void or voidable treatment based solely on the common directorship or interest, interested-director presence, or counted votes. Other authorization, governing-document, fiduciary, securities, and remedy questions remain outside that effect.

Statutes and sources

• N.J.S.A. § 14A:6-8 — covered conflicts, alternatives, disinterested votes, interested-director quorum, compensation, and limited effect. Official current section text, accessed September 4, 2026.
• N.J.S.A. §§ 14A:5-9 and 14A:5-11 — general shareholder quorum, vote, and class treatment. Official quorum text and official vote text, accessed September 4, 2026.
• N.J.S.A. § 14A:5-6 — shareholder written-consent threshold, filing, and effect. Official current section text, accessed September 4, 2026.