Corporate Interested-Director Transaction Requirements in New York

At a glance

Requirements one by one

Governing law, entity, transaction, and covered-person scope

N.Y. Bus. Corp. Law § 102(a)(4)-(5) defines the domestic corporation as a for-profit corporation formed or preserved under the chapter and defines a director broadly as a governing-board member regardless of title. N.Y. Bus. Corp. Law § 713 covers a corporation's transaction with one or more directors and a transaction with another entity in which a director is a director or officer or has a substantial financial interest.

The section does not independently cover the corporation's interested officers who are not directors. It also does not define substantial financial interest, related person, control, or independence, so those classifications cannot be assumed from labels alone.

Disclosure and disinterested board or committee approval

Section 713(a)(1) requires good-faith disclosure or board/committee knowledge of the material facts about the director's transaction interest and any common directorship, officership, or financial interest. The board or committee then needs a vote sufficient for approval without counting the interested director.

New York has an express small-disinterested-group fallback. If those votes are insufficient to constitute a board act under § 708, unanimous approval by the disinterested directors can satisfy the conflict procedure. N.Y. Bus. Corp. Law §§ 707 and 708(b), (d) otherwise use a majority-of-entire-board quorum and a majority of directors present, with lawful certificate/bylaw variation and an all-member written-consent route.

Shareholder approval

Section 713(a)(2) requires the same good-faith disclosure or knowledge for the shareholders entitled to vote and their approval. The paragraph does not exclude shares held by the interested director.

N.Y. Bus. Corp. Law §§ 608(a)-(b) and 614(b) supply the ordinary defaults: a majority of entitled votes is a quorum, reducible no lower than one-third or increasable as authorized, and approval is a majority of votes cast for or against the action. An abstention is not a vote cast unless the certificate or a shareholder-adopted bylaw says otherwise.

Fairness alternative and affirmative proof

If the transaction was not approved under subsection (a), § 713(b) lets the corporation avoid it unless the transaction parties affirmatively establish that it was fair and reasonable to the corporation when approved by the board, committee, or shareholders. The section gives no element-by-element definition of fair and reasonable.

That proof route is different from subsection (a) approval, which does not state a separate fairness predicate. This cell reports the statutory options without deciding whether approval was informed or a transaction fair.

Interested-director presence, vote, quorum, and consent

Section 713(c) lets common and interested directors count toward meeting quorum. The opening of subsection (a) also prevents their presence or counted votes from being a disqualifying reason alone when a stated route applies, but the board approval itself still must be sufficient without the interested vote or use the unanimous-disinterested fallback.

Section 708(b) requires every board or committee member to consent in writing to action without a meeting and places the resolution and consents with the minutes. Section 713 states no special written-abstention mechanism, so a meeting and a written action should not be treated as procedurally identical.

Certificate restrictions, compensation, and statutory effect

Section 713(d) lets the certificate impose additional director-transaction restrictions and make a violating transaction void or voidable by the corporation. The statutory route therefore cannot be applied without the current certificate. Subsection (e) separately lets the board fix director compensation in any capacity unless the certificate or bylaws provide otherwise.

When subsection (a) applies, the transaction is not void or voidable for the covered conflict, presence, or counted vote alone. Without that approval, the corporation has the subsection (b) avoidance route subject to affirmative fair-and-reasonable proof. The statute does not create a controlling-stockholder, going-private, or general officer branch and does not resolve independent authorization, fiduciary, securities, or remedy questions.

Records and external boundaries

N.Y. Bus. Corp. Law § 624(a) requires minutes of shareholder, board, and executive-committee proceedings, kept in writing or a form reasonably convertible to writing. The record can preserve the disclosure, voter status, quorum, vote, consent, approval, and certificate review, but it cannot itself prove good faith, materiality, fairness, authority, or compliance with duties outside § 713.

What trips people up

The unanimous-disinterested route is a fallback, not the ordinary threshold for every conflict. It matters when the disinterested directors' votes are too few to constitute an act under § 708.

New York also permits certificate provisions stricter than § 713. A transaction that fits a statutory approval route may still encounter a certificate restriction that makes violations void or voidable by the corporation.

Common questions

May an interested director count toward quorum?

Yes. Section 713(c) says common or interested directors may count toward board or committee quorum. The conflict approval vote must still satisfy subsection (a)(1) without their votes or through unanimous disinterested approval.

Are interested-director shares excluded from the shareholder vote?

Section 713(a)(2) says shareholders entitled to vote and does not state an interested-share exclusion. The certificate, bylaws, and any other applicable transaction rule still must be checked.

Does board approval always eliminate the fairness question?

The subsection (a) route states no separate fairness condition, while subsection (b) supplies fair-and-reasonable affirmative proof when approval was not obtained. Independent fiduciary or other legal claims remain outside this statutory comparison.

Statutes and sources

• N.Y. Bus. Corp. Law § 102(a)(4)-(5) — domestic corporation and director definitions. Official Senate text, accessed September 4, 2026.
• N.Y. Bus. Corp. Law §§ 707-708 — board quorum, vote, and written consent. Official § 707 and official § 708, accessed September 4, 2026.
• N.Y. Bus. Corp. Law §§ 608 and 614 — shareholder quorum and vote. Official § 608 and official § 614, accessed September 4, 2026.
• N.Y. Bus. Corp. Law § 713 — covered transactions, disclosure, approvals, fairness, quorum, certificate limits, compensation, and effect. Official Senate text, accessed September 4, 2026.
• N.Y. Bus. Corp. Law § 624(a) — corporate minutes and record form. Official Senate text, accessed September 4, 2026.