Corporate Interested-Director Transaction Requirements in South Carolina
At a glance
| Governing law, entity, transaction, and covered-person scope | South Carolina Business Corporation Act, Title 33 chs. 1-20; domestic for-profit corporation. Covers corporation transaction involving a corporate director's direct/indirect interest; caption mentions officer but operative conflict rule supplies no standalone officer route (§§ 33-1-400(4), 33-8-310(a)) |
|---|---|
| Interest, relationship, control, and materiality definitions | Indirect interest if other party is entity where director has material financial interest/general-partner status, or entity where director is director/officer/trustee and transaction is or should be board-considered. No materiality, related-person, control, or independence definition (§ 33-8-310(b)) |
| Required disclosure, facts, timing, knowledge, and recipients | Material transaction facts and director's interest disclosed to or known by board/committee or shareholders entitled to vote before authorization, approval, or ratification. Fairness route has no disclosure predicate; no special writing, confidentiality, director-source, tabulator, or timing rule stated (§ 33-8-310(a)) |
| Disinterested or qualified board/committee composition, quorum, vote, and good faith | Affirmative majority of directors on board/committee without direct/indirect interest; never one director alone. That majority creates conflict quorum. No good-faith, qualified-only committee, selection, or exclusion-from-deliberation condition stated (§ 33-8-310(c)) |
| Disinterested shareholder notice, voting group, quorum, consent, and threshold | Majority of shares entitled to count; same eligible-share majority, whether present or not, is conflict quorum. Excludes shares owned/vote-controlled by interested director or material-interest/general-partner entity; excluded shares count for other Act approval (§ 33-8-310(b), (d)) |
| Fairness alternative, relevant time, burden, and statutory standard | Separate fairness-to-corporation route. Board/shareholder route shifts unfairness burden to challenger; without either, transaction proponent bears fairness burden. No measurement time or fairness definition stated (§ 33-8-310(a)) |
| Interested-person presence, participation, vote, abstention, and written consent | Interested director's presence/vote does not affect otherwise compliant board action, but cannot supply no-interest approving majority. General no-meeting action requires assent of all board members and signed consent from each; no conflict-specific abstention route stated (§§ 33-8-210, 33-8-310(c)) |
| Controlling stockholders, officers, compensation, and special transaction routes | No controlling-stockholder, going-private, corporate-opportunity, or standalone officer-conflict route stated. Board may fix director compensation unless governing records say otherwise; director loan/guarantee uses benefited-share exclusion or corporate-benefit board determination and approval (§§ 33-8-111, 33-8-310, 33-8-320) |
| Statutory effect, remedies, records, fiduciary, and public-company boundaries | Satisfied route makes transaction not voidable by corporation solely because of director interest and allocates fairness burden; unlawful loan does not affect borrower liability. Permanent meeting and no-meeting action records required. Other authorization, governing-document, fiduciary, securities, enforcement, and remedy questions remain (§§ 33-8-310(a), 33-8-320(b), 33-16-101(a)) |
Requirements one by one
Governing law, covered transaction, and covered person
S.C. Code § 33-1-400(4) defines the domestic corporation as a nonforeign for-profit corporation incorporated under or subject to Title 33 Chapters 1 through 20. Section 33-8-310(a) covers a transaction with that corporation in which one of its directors has a direct or indirect interest.
Although the section caption says “Director or Officer conflict of interest,” the operative conflict definition and three routes name a director. The section does not create a standalone procedure for an officer who is not also a director.
Indirect interests have two entity branches
Section 33-8-310(b) treats the director as indirectly interested when the other party is an entity in which the director has a material financial interest or serves as general partner. It also reaches an entity for which the director is a director, officer, or trustee when the transaction is or should be considered by the corporation's board.
The section does not define materiality, control, related person, disinterestedness, or independence. A real relationship therefore cannot be classified from its label alone.
Board approval needs a no-interest majority and more than one director
The material facts of both the transaction and the director's interest must be disclosed to or known by the board or committee. The approving vote must then come from a majority of the directors on that body who have no direct or indirect interest.
South Carolina expressly bars approval by a single director. When the required no-interest majority approves, that majority establishes the special conflict quorum. The statute states no separate good-faith condition or requirement that the interested director leave the deliberation.
Eligible-share approval uses an absolute-majority quorum
The material transaction and interest facts likewise must be disclosed to or known by the shareholders entitled to vote. Approval requires a majority of the shares entitled to count, and a majority of all eligible shares—whether present or not—constitutes the conflict-procedure quorum.
The calculation 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. It does not expressly exclude the shares of the separate entity for which the director merely serves as director, officer, or trustee. Excluded shares still count when another provision of the Business Corporation Act independently requires transaction approval.
Approval changes the statutory fairness burden
Fairness to the corporation is a separate route. If the board or shareholder route has been accomplished, the party claiming unfairness carries the burden of proving it. If neither approval route has been accomplished, the party seeking to uphold the transaction carries the burden of proving fairness.
Section 33-8-310 does not define fairness or specify when it is measured. This cell does not supply elements or a measurement date from outside the statute.
Presence, vote, and no-meeting action are different questions
An interested director's presence or vote does not invalidate an otherwise compliant no-interest-director approval under § 33-8-310(c). That director's vote still cannot supply the required approving majority.
For ordinary action without a meeting, § 33-8-210 requires assent by all board members unless the articles or bylaws provide otherwise. Each director signs a written consent, and the consent is included in the minutes or filed with the corporate records. The conflict statute supplies no special written-abstention mechanism.
Compensation and director loans have separate text
Section 33-8-111 permits the board to fix director compensation unless the articles or bylaws provide otherwise. It does not say that compensation is automatically outside § 33-8-310.
Section 33-8-320 separately permits a director loan or guarantee if the outstanding voting-share majority approves without benefited-director shares, or if the board determines the loan or guarantee benefits the corporation and approves the specific transaction or a general plan. Even a violation does not eliminate the borrower's liability on the loan.
The safe harbor is narrow, and the process leaves records
Satisfying one § 33-8-310(a) route makes the transaction not voidable by the corporation solely because of the director's interest. Those limiting words do not resolve independent authorization, governing-document, fiduciary, securities, fairness, enforcement, or other-remedy questions.
Section 33-16-101(a) requires permanent minutes of shareholder and board meetings and permanent records of shareholder, board, and committee actions taken without a meeting or in place of the board. A record documents the process; it does not by itself prove disclosure, disinterestedness, fairness, or statutory compliance.
What trips people up
The board route cannot be approved by one director even if that director is the only person without a conflict. The shareholder route also uses a majority of all shares entitled to count as its special quorum, not merely a majority of the eligible shares present at a meeting.
The eligible-share exclusion is narrower than the indirect-interest definition. Section 33-8-310(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 or vote?
Section 33-8-310(c) says the director's presence or vote does not affect an otherwise compliant action. The approving majority must still consist of more than one director without a direct or indirect interest.
Does shareholder or board approval prove the transaction is fair?
No. The statute puts the burden of proving unfairness on the challenger after one of those routes, but it does not declare the transaction fair.
What happens if neither approval route occurred?
Fairness remains a statutory alternative, but the party seeking to uphold the transaction carries the burden of proving it. The statute does not define that standard or its measurement time.
Is an officer who is not a director covered by this conflict procedure?
The caption mentions an officer, but the operative conflict definition and approval routes name directors. Section 33-8-310 does not state a standalone officer route.
Statutes and sources
- S.C. Code § 33-1-400(4) — domestic-corporation definition. Official South Carolina Code text, accessed September 4, 2026.
- S.C. Code §§ 33-8-111, 33-8-210, 33-8-310, and 33-8-320 — compensation, written board action, conflict procedure and effect, and director loans. Official South Carolina Code text, accessed September 4, 2026.
- S.C. Code § 33-16-101(a) — permanent action records. Official South Carolina Code text, accessed September 4, 2026.
Source links
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