Corporate Interested-Director Transaction Requirements in Vermont

At a glance

Requirements one by one

Governing law, transaction, and director scope

11A V.S.A. § 8.60 covers a transaction effected or proposed by the corporation or an entity it controls. The trigger is that, at the relevant time, the director is a party, knowingly holds a material financial interest, or knows a related person is a party or has such an interest.

Control includes direct or indirect majority governing-body election or removal power and a separate majority-risk-or-residual-returns test. The subchapter does not create a general officer-conflict route.

Interest, related persons, and the undefined voter term

A material financial interest is one reasonably expected to impair the director's objectivity when participating in authorization. Related persons include the detailed family and household list, controlled entities, other- entity director or governing-body roles, specified fiduciary roles, and the director's employer or an entity it controls.

Section 8.62 repeatedly requires “qualified directors,” but the current Act does not define that term. Chapter 1 contains the Act's general definitions, while § 8.60 defines the conflict-subchapter terms; neither supplies qualified-director criteria. This cell therefore does not import another jurisdiction's definition or decide who qualifies.

Required and modified disclosure

Required disclosure includes the conflict's existence and nature plus every known transaction fact that a conflict-free director would reasonably see as material to deciding whether to proceed.

The modified route in § 8.62(b) applies only when the conflict comes from the specified related-person entity, director, governing-body, fiduciary, or employer tie and the director reasonably believes full disclosure would violate law, an enforceable confidentiality obligation, or professional ethics. The director must give the special voters all nonviolative information, disclose the conflict's existence and nature, and explain the nondisclosure duty.

The board and committee route

The transaction needs an affirmative majority, never fewer than two, of the statute's undefined qualified directors who vote. They must deliberate and vote outside every other director's presence and without that person's participation.

An acting committee must consist entirely of qualified directors and either include all such directors on the board or members appointed by their affirmative majority. A majority—but never fewer than two—forms the special quorum. The subchapter states no additional good-faith or negligence condition.

This conflict vote is not necessarily the transaction's authorization. If the articles, bylaws, or law impose another quorum or voting rule, § 8.62(d) requires separate board or committee action in which nonqualified directors may participate.

Qualified-share action and written holder information

11A V.S.A. § 8.63 uses a majority of votes cast by qualified shares after notice describing the proposed action and required disclosure to the extent shareholders do not already know it. Before the vote, the conflicted director must tell the secretary or tabulator in writing the number and holder identity of every share the director knows is unqualified.

Qualified shares exclude known or reported record and beneficial shares held by the conflicted director or most related persons. A majority of all votes entitled from qualified shares forms quorum. Unqualified holders' presence and votes do not disturb an otherwise compliant conflict vote, but they may participate in a separate authorization vote required by other law or governing documents.

Fairness is defined and tied to relevant time

The third route requires the transaction to be established fair to the corporation at the relevant time. Fair means beneficial to the corporation as a whole, appropriately considering whether the director's dealings were fair and whether the consideration was comparable to what an arm's-length transaction might have obtained.

Relevant time is the § 8.62 director action or, if the matter never goes to the board or committee, when the corporation or controlled entity becomes legally obligated to close. Sections 8.60 and 8.61 state no evidentiary burden or proof standard.

Participation, consent, compensation, and records

Nonqualified directors are excluded from the special deliberation and vote but may participate in separate authorization. The conflict subchapter states no written-consent abstention route. Under 11A V.S.A. § 8.21, general board action without a meeting requires every director's signed written consent and places the consent in the minutes or corporate records; that rule cannot be assumed to erase § 8.62's special deliberation, voting, and presence conditions.

11A V.S.A. § 8.11 separately lets the board fix director compensation unless the articles or bylaws say otherwise, without a conflict-specific presumption or exclusion. The conflict subchapter states no officer, controller, going- private, common-director, loan, corporate-opportunity, or public-company route and adds no special filing.

Statutory effect

Under 11A V.S.A. § 8.61, compliant director action, compliant shareholder action, or established fairness prevents equitable relief, damages, or other sanctions against the director on the ground of the director's interest. A transaction that is not a conflicting-interest transaction gets parallel interest-ground protection.

That effect does not establish independent authorization, validity on every ground, enforceability, fiduciary compliance, or securities-law compliance. The Act expressly preserves separate authorization, and the undefined qualified-director term remains a statutory uncertainty rather than a blank this cell may fill.

What trips people up

The special voter is undefined. The two-director floor and committee rules are explicit, but current Title 11A does not say who is a qualified director.

The special vote and authorization are separate. A conflict-procedure vote can coexist with another required vote under the articles, bylaws, or law, and nonqualified directors or shares may participate in that separate action.

Qualified-share voting has two denominators. Approval is a majority of qualified votes cast; quorum is a majority of all votes entitled from qualified shares.

Common questions

Can exactly two qualified directors act?

The numerical floor permits two if the majority, quorum, disclosure, deliberation, and committee rules are satisfied. The Act does not define which directors qualify.

Can the conflicted director attend the special deliberation?

No. The special voters must deliberate and vote outside every other director's presence and without that director's participation.

Does the conflict vote authorize the transaction by itself?

Not necessarily. A separate action is required if the articles, bylaws, or law impose another authorization quorum or voting requirement.

Statutes and sources

• 11A V.S.A. §§ 8.60–8.61 — definitions, three protection routes, fairness, relevant time, and statutory effect.
• 11A V.S.A. § 8.62 — disclosure, modified disclosure, board and committee procedure, special quorum, participation, and independent authorization.
• 11A V.S.A. § 8.63 — qualified shares, notice, written share information, disclosure, vote, quorum, court cure, and independent authorization.
• 11A V.S.A. §§ 8.11 and 8.21 — director compensation and written board action records.

All are in the official Vermont Business Corporation Act Chapter 8, accessed September 4, 2026. The official Chapter 1 definitions and 2026 acts table were checked the same date for the undefined term and current-session amendments.