Corporate Interested-Director Transaction Requirements in Rhode Island

At a glance

Requirements one by one

Directors, officers, and common offices are covered

R.I. Gen. Laws § 7-1.2-807(a) reaches a contract or transaction directly between the corporation and one or more directors or officers. It also reaches a transaction with another corporation, partnership, association, or other organization in which a director or officer holds a director or officer post or has a financial interest.

The section does not define financial interest, impose a materiality floor for that interest, or add an indirect-interest, related-person, control, or independence formula. It calls for disclosure of material facts about the interest or relationship but does not separately require disclosure of material transaction facts.

The board route uses a disinterested-director majority

The informed board or committee route requires affirmative votes from a majority of the disinterested directors. Section 7-1.2-807(a)(1) expressly allows that approving group to be smaller than an ordinary quorum and states no minimum of two directors, special committee-composition rule, good-faith test, or mandatory exclusion from deliberations.

Under § 7-1.2-807(b), common or interested directors may count toward the meeting quorum. Their votes do not become part of the required disinterested- director majority merely because they attended or counted for quorum.

The shareholder route uses the general voting architecture

Section 7-1.2-807(a)(2) requires the material interest or relationship facts to be disclosed to or known by the shareholders entitled to vote, followed by specific authorization, approval, or ratification. It does not exclude interested shares or state a conflict-specific quorum, voting group, or threshold.

The general meeting rule in § 7-1.2-705(a) therefore supplies a default quorum of a majority of entitled shares and approval by a majority of the present or proxied shares entitled to vote on the matter. The Act, articles, or bylaws may require a greater vote or class voting, and the articles or bylaws may vary the quorum subject to the statutory one-third floor.

Fairness and reasonableness are a separate route

Section 7-1.2-807(a)(3) separately applies if the contract or transaction is fair and reasonable to the corporation. The section does not identify a measurement time, factors, valuation method, or who bears the burden. This page does not decide whether a particular transaction satisfies that standard.

Presence, participation, and a counted vote are not automatic defects

The narrow statutory protection in § 7-1.2-807(a) may apply even though an interested director or officer is present at or participates in the meeting or their votes are counted. The provision does not say that such a vote supplies the disinterested-director majority or that participation is advisable in a particular matter.

General board and committee action without a meeting instead follows § 7-1.2-810. Unless the articles or bylaws provide otherwise, every director or committee member must consent in writing or by electronic transmission, before or after the action, and the consents must be filed with the minutes. The conflict section creates no special abstaining-director consent route.

Shareholder action without a meeting defaults to all entitled shareholders' written consent under § 7-1.2-707. The articles may authorize the meeting- equivalent minimum for most actions; prompt notice then goes to every shareholder who could have voted, and the consents are filed with the minutes. Those mechanics do not remove § 7-1.2-807(a)(2)'s disclosure and specific- approval conditions.

The statutory consequence is deliberately narrow

If one of § 7-1.2-807(a)'s routes is met, the contract or transaction is not void or voidable, and the directors or officers are not liable with respect to it, solely because of the listed interest, relationship, meeting participation, or counted-vote grounds. The section states no broader immunity concerning fiduciary duties, authorization under another provision, disclosure outside the section, damages or injunctions on another ground, or enforceability.

R.I. Gen. Laws § 7-1.2-1502(a) requires correct and complete minutes of shareholder, board, and board-committee proceedings. The record may be written or maintained in another form capable of conversion to writing within a reasonable time.

What trips people up

The conflict section's board and shareholder routes use different levels of specificity. The board route expressly requires a disinterested-director majority even below quorum, while the shareholder route names no special eligible-share exclusion or threshold and therefore operates with the general meeting or consent rules.

Pending S 2761 would not replace § 7-1.2-807. It would add a separate statutory business-judgment rule and an advance special-committee independence procedure for related-party transactions, so its proposed standards are not current law.

Common questions

May an interested director count toward quorum?

Yes. Section 7-1.2-807(b) expressly permits common or interested directors to count when determining quorum for the board or committee meeting.

Must at least two disinterested directors approve?

The current section states no two-director floor. It requires the affirmative votes of a majority of the disinterested directors even when they are fewer than a quorum.

Does compliance establish that the transaction is enforceable?

No. The stated effect addresses voidability and director or officer liability solely on the conflict, meeting-participation, and counted-vote grounds listed in § 7-1.2-807. Other authorization, governing-record, fiduciary, and transaction questions remain outside that narrow text.

Statutes and sources

• R.I. Gen. Laws § 7-1.2-807. The quoted current text above supplies the covered relationships, disclosure conditions, three alternative routes, interested-person participation treatment, quorum rule, and narrow statutory effect. Official text (accessed September 5, 2026).
• R.I. Gen. Laws §§ 7-1.2-705 and 7-1.2-707. The quoted current text supplies the general shareholder meeting quorum and vote plus the written-consent routes. Official § 7-1.2-705 and official § 7-1.2-707 (accessed September 5, 2026).
• R.I. Gen. Laws § 7-1.2-810. The quoted current text supplies the general board and committee written/electronic consent rule. Official text (accessed September 5, 2026).
• R.I. Gen. Laws § 7-1.2-1502. The quoted current text supplies the minutes and record-form rule. Official text (accessed September 5, 2026).
• RI S 2761 (2026). The official introduced text supplies the proposed business-judgment and advance special-committee independence provisions. Official introduced bill (accessed September 5, 2026).