Corporate Interested-Director Transaction Requirements in North Carolina
At a glance
| Governing law, entity, transaction, and covered-person scope | North Carolina Business Corporation Act, ch. 55; ordinary domestic private for-profit/capital-stock corporation. Covers corporation transaction where corporate director has direct/indirect interest; section names directors, not a general officer-conflict route (§§ 55-1-40(4), 55-8-31(a)) |
|---|---|
| Interest, relationship, control, and materiality definitions | Indirect interest if other party is entity where director has material financial interest/general-partner status, or is entity where director is director/officer/trustee and transaction is or should be board-considered. No materiality, related-person, control, independence, or disinterested definition (§ 55-8-31(b)) |
| Required disclosure, facts, timing, knowledge, and recipients | Material facts of transaction and director's interest disclosed to or known by board/committee/subcommittee or shareholders entitled to vote before authorization, approval, or ratification; fairness route does not use disclosure predicate and no special written/confidential/tabulator disclosure stated (§ 55-8-31(a)(1)-(3)) |
| Disinterested or qualified board/committee composition, quorum, vote, and good faith | Affirmative majority of directors on board/committee/subcommittee having no direct/indirect interest; that majority establishes conflict quorum. Interested presence/vote does not affect otherwise compliant action. No two-director floor, good-faith condition, committee-selection rule, or mandatory exclusion from deliberation stated (§ 55-8-31(c)) |
| Disinterested shareholder notice, voting group, quorum, consent, and threshold | Majority of shares entitled to count; same eligible-share majority is conflict quorum. Excludes shares owned/vote-controlled by interested director and entity where director has material financial interest or is general partner; excluded shares still count for other Chapter approval. Common director/officer/trustee entity branch is not named in share exclusion (§ 55-8-31(b)-(d)) |
| Fairness alternative, relevant time, burden, and statutory standard | Separate route if transaction was fair to corporation. Section states no measurement time, fairness definition, or burden allocation; do not infer one (§ 55-8-31(a)(3)) |
| Interested-person presence, participation, vote, abstention, and written consent | Interested director's presence/vote does not affect validity of otherwise compliant board route, but approval majority still comes from no-interest directors. Ordinary no-meeting action needs every board member's unrevoked signed consent, delivered and included/filed with records; no special conflict abstention route stated (§§ 55-8-21, 55-8-31(c)) |
| Controlling stockholders, officers, compensation, and special transaction routes | No controlling-stockholder, going-private, or general officer route. Board may fix director compensation without regard to personal interest unless articles/bylaws say otherwise; fairness presumption applies only public corporation or one whose articles elect it (§§ 55-8-11, 55-8-31) |
| Statutory effect, remedies, records, fiduciary, and public-company boundaries | Satisfied route makes conflict transaction not voidable by corporation solely for director interest. Corporation maintains shareholder/board/committee meeting and no-meeting action records. Independent authorization, fairness, governing-document, fiduciary, securities, public-company, enforcement, and other-remedy questions remain (§§ 55-8-31(a), 55-16-01(a), (e)) |
Requirements one by one
Governing law, entity, transaction, and covered-person scope
N.C. Gen. Stat. § 55-1-40(4) defines the Chapter 55 domestic corporation as a nonforeign corporation for profit or one having capital stock under the chapter. N.C. Gen. Stat. § 55-8-31(a) covers a transaction with that corporation in which its director has a direct or indirect interest.
The section names directors, not a general officer-conflict, related-person, controlling-stockholder, or going-private route. Independent authority, governing-document, fiduciary, securities, and transaction-specific rules still apply.
Direct and indirect interests
Section 55-8-31(b) has two indirect-interest branches. One applies when the other transaction party is an entity in which the director has a material financial interest or serves as general partner. The other applies when the director is the entity's director, officer, or trustee and the transaction is or should be considered by the corporation's board.
The section does not define materiality, related person, control, disinterestedness, or independence. A real relationship therefore cannot be classified from a label alone.
Disclosure and no-interest director approval
The material transaction facts and the director's interest must be disclosed to or known by the board, committee, or subcommittee. The conflict route then requires an affirmative majority of directors on that body who have no direct or indirect interest.
That approving majority creates the special conflict-procedure quorum under subsection (c). The section states no two-director floor, express good-faith condition, committee-selection rule, or mandatory exclusion of the interested director from deliberation.
Eligible-share approval has a narrower exclusion
The shareholder route uses a majority of shares entitled to count, and the same eligible-share majority is its quorum. It excludes shares owned or vote- controlled by the interested director and by an entity in which the director has a material financial interest or serves as general partner.
The exclusion does not name the separate subsection (b)(2) entity for which the director is merely a director, officer, or trustee. Excluded shares still count for any independent Chapter 55 approval, so the conflict vote and ordinary transaction authorization may require separate calculations.
Fairness is a sparse alternative
Section 55-8-31(a)(3) makes fairness to the corporation a separate route. It does not state when fairness is measured, define the standard, or assign a burden. This cell does not fill those gaps from case law or infer that a recital proves fairness.
Presence, vote, and written consent
Subsection (c) says the interested director's presence or vote does not affect an otherwise compliant no-interest-director approval. That does not make the interested vote part of the approving majority.
N.C. Gen. Stat. § 55-8-21 makes ordinary no-meeting action unanimous unless the articles or bylaws provide otherwise. Every director signs an unrevoked written consent, it is delivered to the corporation, and it is included in the minutes or filed with corporate records. Section 55-8-31 states no special conflict abstention mechanism for that consent route.
Director compensation is a separate statutory branch
N.C. Gen. Stat. § 55-8-11 lets the board fix director compensation without regard to personal interest unless the articles or bylaws say otherwise. It adds a fairness presumption only for a public corporation or a corporation whose articles elect that treatment, subject to proof by a preponderance. That special compensation rule should not be generalized to other private-company conflict transactions.
Statutory effect and records
When one subsection (a) route applies, the transaction is not voidable by the corporation solely because of the director's interest. The words “by the corporation” and “solely” limit the stated effect; the provision does not decide independent authorization, fairness, enforceability, fiduciary duties, securities law, or relief on another ground.
N.C. Gen. Stat. § 55-16-01(a), (e) requires records of shareholder, board, and committee meetings and actions without a meeting, maintained for reasonably timely inspection. Those records document the process without proving interest, materiality, disinterestedness, fairness, or validity.
What trips people up
North Carolina's special board quorum is created by the approving disinterested-director majority. Do not substitute the ordinary board quorum or assume that one approving director is insufficient when the statute states no numerical floor.
The shareholder exclusion also does not cover both indirect-interest branches identically. Subsection (d) expressly points to the material-financial-interest or general-partner entity in subsection (b)(1), not the common-office entity in subsection (b)(2).
Common questions
May an interested director attend and vote?
Subsection (c) says presence or a vote does not affect otherwise compliant action. The approving conflict majority still must consist of directors with no direct or indirect interest.
Does the statute cover an officer who is not a director?
No general officer-conflict route appears in § 55-8-31. An officer role can create a director's indirect interest when the director serves as an officer of the transaction's other entity and the board-consideration condition applies.
Does fairness require a particular finding or burden?
Section 55-8-31 simply says the transaction was fair to the corporation. It does not provide a measurement time, element list, or burden allocation.
Statutes and sources
- N.C. Gen. Stat. § 55-1-40(4) — domestic corporation definition. Official NCGA text, accessed September 4, 2026.
- N.C. Gen. Stat. §§ 55-8-11 and 55-8-21 — director compensation and written board action. Official Article 8 text, accessed September 4, 2026.
- N.C. Gen. Stat. § 55-8-31 — conflict definition, disclosure, board and shareholder approvals, fairness, quorum, exclusions, and statutory effect. Official NCGA text, accessed September 4, 2026.
- N.C. Gen. Stat. § 55-16-01(a), (e) — meeting and no-meeting action records. Official NCGA text, accessed September 4, 2026.
Source links
Every statute quoted above, linked, with the date we checked it.
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