Corporate Interested-Director Transaction Requirements in South Dakota

At a glance

Requirements one by one

Governing law, transaction, and director scope

S.D. Codified Laws § 47-1A-860 reaches a transaction already effected or merely proposed by the corporation, a subsidiary, or another entity in which the corporation has a controlling interest. A transaction enters the subpart when a corporate director has the defined conflicting interest.

The definition is deliberately director-specific. The subpart does not create a general officer-conflict route or decide whether a transaction was otherwise authorized under the Act, articles, bylaws, or another agreement.

Interest, related person, and time of commitment

One trigger applies when the director knows at the time of commitment that the director or a related person is a party or has a beneficial financial link of the significance described in § 47-1A-860(1)(a). Another applies to a board- significant transaction and listed entities or people tied to the director.

“Related person” includes the detailed family and same-household list and specified trusts, estates, and fiduciary relationships. “Time of commitment” is consummation, or, for a contract, the point when unilateral withdrawal would entail significant loss, liability, or other damage.

Required and modified disclosure

Required disclosure has two parts: the conflict's existence and nature, and all known subject-matter facts that an ordinarily prudent person would reasonably consider material to whether the corporation should proceed.

Section 47-1A-862.1 supplies a narrow confidentiality alternative. Neither the director nor the specified related person may be a party; the director must tell the voting directors about the conflict and the character and limits of the legal, professional, or confidentiality duty before the vote; and the director must play no direct or indirect part in deliberations or voting.

Qualified-director action and quorum

After required disclosure or the permitted alternative, the transaction needs the affirmative vote of a majority—but no fewer than one—of the qualified directors who vote. A committee works only if it has at least one qualified director and consists of all qualified directors on the board or members appointed by their affirmative majority.

Section 47-1A-862.2 supplies its own quorum: a majority, never fewer than one, of all qualified directors on the board or committee. An otherwise compliant action is not affected by a nonqualified director's presence or vote. The subpart does not add a good-faith or negligence recital to this route.

Qualified-share action, notice, and director statement

The shareholder route uses a majority of votes entitled to be cast by all qualified shares, not merely a majority of votes cast. Before the vote, shareholders receive notice describing the transaction and required disclosure to the extent not already known. The interested director must also tell the secretary or tabulator the number and holder/controller identity of every known share beneficially owned or vote-controlled by the director or a related person.

Qualified shares exclude those known to the secretary or tabulator before the vote to be beneficially owned or vote-controlled by the interested director or a related person. A majority of all qualified-share votes is the special quorum; presence or voting of unqualified shares does not disturb an otherwise compliant action. Section 47-1A-863.3 gives the court a fact-dependent cure when the only failure is the director's share statement and the director proves the failure neither determined nor was intended to influence the outcome.

Fairness at the time of commitment

The third route requires the transaction to be “established to have been fair to the corporation,” judged according to the circumstances at the time of commitment. That defined time can precede closing when the corporation becomes contractually bound and unilateral withdrawal would cause the stated harm.

The section does not identify fairness elements or expressly name which party bears the burden. This page therefore reports the standard and time without predicting whether either is satisfied.

Presence, participation, dissent, and written action

Outside the modified-disclosure route's participation bar, the conflict subpart says a nonqualified director's presence or vote does not affect otherwise compliant qualified-director action. The general meeting rule in § 47-1A-824.1 deems a present director to assent unless the director uses one of its objection, minute-entry, or written dissent or abstention methods; a director voting in favor cannot use that protection.

Written board action is different. S.D. Codified Laws § 47-1A-821 requires every director to sign and deliver the consent unless the articles or bylaws require a meeting; the conflict subpart supplies no special interested-director abstention from that unanimity. Shareholder action without a meeting likewise uses signed consent from all shareholders entitled to vote under § 47-1A-704.

Compensation, records, and statutory effect

S.D. Codified Laws § 47-1A-811 separately lets the board fix director compensation unless the articles or bylaws provide otherwise. It supplies no conflict-specific fairness presumption. The conflicting-interest subpart contains no separate controller, going-private, corporate-opportunity, loan, listed-company, or officer procedure.

Compliance has a focused effect. A conflicting-interest transaction may not be enjoined, set aside, or produce damages or other sanctions in the specified shareholder or corporate proceeding because the director or an associate has an interest when qualified-director action, qualified-share action, or the fairness route applies. S.D. Codified Laws § 47-1A-861 gives the parallel interest-only protection to a transaction that is not a director's conflicting- interest transaction.

S.D. Codified Laws § 47-1A-1601 requires permanent minutes of shareholder and board meetings and records of shareholder or board action without a meeting and committee action taken in the board's place. Those records document the statutory process; they do not themselves establish disclosure, qualification, fairness, authority, or compliance with independent duties.

What trips people up

The shareholder denominator is unusually demanding. The transaction needs a majority of votes entitled to be cast by all qualified shares. It is not a simple majority of disinterested votes that happen to be cast.

Modified disclosure is not ordinary partial disclosure. It requires the stated duty constraint, excludes a transaction where the director or specified related person is a party, and removes the director from deliberation and vote.

Meeting abstention and written consent are different. A present director can preserve dissent or abstention under § 47-1A-824.1, but ordinary written board action under § 47-1A-821 requires all directors' signatures.

Common questions

Can one qualified director approve the transaction?

Potentially. The statute sets a floor of one and requires a majority of the qualified directors who vote, with the separate committee-composition and qualified-director quorum rules still controlling.

Do shares tied to the interested director count in the qualified vote?

No, when the secretary or authorized tabulator knows before the vote that the director or a related person beneficially owns or controls their vote. They do not become qualified shares merely by being present or voted.

Does a qualified vote establish fairness?

No. Qualified-director action, qualified-share action, and fairness at the time of commitment are three separate statutory routes. The cell does not turn one route into a factual fairness conclusion.

Statutes and sources

• S.D. Codified Laws §§ 47-1A-860 to 47-1A-861.1 — definitions, scope, fairness time, three routes, and statutory effect.
• S.D. Codified Laws §§ 47-1A-862 to 47-1A-862.3 — director disclosure, confidential-duty alternative, qualified vote, committee, and quorum.
• S.D. Codified Laws §§ 47-1A-863 to 47-1A-863.3 — qualified shares, notice, disclosure, share statement, quorum, and limited court cure.
• S.D. Codified Laws §§ 47-1A-704, 47-1A-811, 47-1A-821, 47-1A-824.1, and 47-1A-1601 — shareholder and board written action, compensation, meeting assent or dissent, and permanent corporate records.

Each citation links to the official South Dakota Legislature API; individual official section URLs are recorded above, all accessed September 4, 2026.