Corporate Interested-Director Transaction Requirements in North Dakota

At a glance

Requirements one by one

Governing law, people, and transactions

N.D.C.C. § 10-19.1-51 covers contracts and other transactions between the corporation and a director or the director's family member. It also reaches a director or governor of a related organization and family, and an organization where the corporation's director or family member has a listed role or material financial interest.

The section does not use a proposed-transaction, controlled-subsidiary, general officer, or indirect-interest formula. Its protection also does not replace the separate authority needed for the corporation to enter the transaction.

Interest, family, and related-organization boundaries

The statute does not generally define “material financial interest.” It states that a director has such an interest in every organization where the director or a family member has one.

For this section, family means a spouse, parent, child, spouse's child, brother, sister, or the spouse of any of them. N.D.C.C. § 10-19.1-01(51) separately defines a related organization as one in which the corporation has a direct or indirect controlling interest.

Full disclosure and the board or committee route

The material facts about both the transaction and the interested director's interest must be fully disclosed or known to the board or committee. Section 10-19.1-51 provides no confidential-information alternative or separate rule for who supplies the facts, whether disclosure is written, or how far in advance it must occur.

The board or committee then acts in good faith by a majority of the directors or committee members currently holding office. Interested directors may not vote and do not count toward quorum. If excluding them leaves too few for the ordinary quorum, the conflict-specific quorum becomes the number of remaining directors or committee members.

N.D.C.C. § 10-19.1-48(6) treats committee members as directors for § 51. It also says creating or delegating to a committee does not alone satisfy the general director-conduct standard.

Shareholder approval has two alternatives

All holders of outstanding shares—including holders not otherwise entitled to vote—must receive or know the material transaction and interest facts. The transaction then needs good-faith approval through one of two routes:

• holders of two-thirds of the voting power entitled to vote and owned by people other than the interested directors; or
• the unanimous affirmative vote of all outstanding shares, whether or not otherwise entitled to vote.

The chapter says “vote” includes written action. N.D.C.C. § 10-19.1-75 provides the general all-entitled-share consent rule and an articles-authorized meeting- threshold alternative, but the conflict vote must still satisfy § 51's own approval and disclosure terms.

Fair and reasonable is an unusual two-part sentence

The first alternative says “the contract or transaction was, and the person asserting the validity of the contract or transaction was, fair and reasonable as to the corporation” when authorized, approved, or ratified. The current text therefore expressly names both the transaction and the validity proponent.

The statute identifies that proponent but provides no fairness factors or express standard of proof. This page does not infer either one.

Presence, vote, quorum, and written board action

An interested director's presence at the shareholder, board, or committee meeting is not itself a voidability ground when a subsection 2 route applies. Presence is not a conflict-procedure vote: under the board route, interested directors cannot vote or count toward quorum.

N.D.C.C. § 10-19.1-47 defaults written board action to all-director signatures. The articles may allow the number that would act at an all-directors-present meeting, followed by immediate notice to all directors. Section 51 supplies no special conflict abstention, and its prohibition on the interested director's vote continues to govern the conflict route.

Compensation, related organizations, and structural transactions

A director does not have a material financial interest in a resolution fixing that director's or another director's compensation as a director, officer, employee, or agent. The resolution is not treated as the covered transaction even if a compensated director is present and voting or other compensated directors vote.

Section 51(2)(d) independently includes a covered distribution and a merger or exchange. Subsection 4 says the fairness, shareholder, and board procedures are not required for a transaction between related organizations. These are narrow statutory boundaries, not conclusions about authorization or fiduciary duties.

Statutory effect and records

A qualifying route makes the transaction not void or voidable because the covered director, family member, person, or organization is a party or because the director attended the authorizing, approving, or ratifying meeting. The section does not declare the deal authorized, fair, enforceable, or immune from another governing-document, fiduciary, statutory, or contractual ground.

Section 10-19.1-48 requires committee minutes, if any, to be available on request to committee members and directors. Section 51 adds no conflict- specific minute, public-company, securities, controller, or special filing requirement.

What trips people up

The shareholder route includes nonvoting holders in two different ways. Every outstanding holder must know or receive the material facts. One approval option then requires unanimity of all outstanding shares, including nonvoting shares; the other uses two-thirds of disinterested voting power.

Interested directors do not count toward the special quorum. The statute shrinks the quorum to all remaining directors when exclusion would otherwise prevent one, instead of letting the interested director supply quorum.

The fairness sentence is not the usual formulation. It expressly says both the transaction and the person asserting validity were fair and reasonable to the corporation. A summary that drops the second subject changes the text.

Common questions

May the interested director attend the meeting?

Yes. Presence alone does not create voidability when a statutory route applies. But the interested director cannot vote or count toward the board-route quorum.

Is a simple majority of disinterested shares enough?

No. The nonunanimous shareholder route uses two-thirds of the voting power entitled to vote and owned by persons other than the interested directors.

Does the same rule govern director compensation?

No. Section 51(3)(a) gives the specified director-compensation resolution its own treatment, including permitted presence and voting.

Statutes and sources

• N.D.C.C. § 10-19.1-01(51), (63)–(64) — related organization, vote, and written-action definitions.
• N.D.C.C. §§ 10-19.1-47 to -48 — board written action, committees, and committee records.
• N.D.C.C. § 10-19.1-51 — covered interests, four routes, disclosure, shareholder and board votes, quorum, compensation, family, and related organizations.
• N.D.C.C. § 10-19.1-75 — general shareholder written action.

All are in the official North Dakota Century Code chapter 10-19.1 PDF, accessed September 4, 2026.