Corporate Interested-Director Transaction Requirements in Virginia

At a glance

Requirements one by one

The current section reaches three covered-person categories and controlled entities

Va. Code § 13.1-603 defines a domestic corporation as a share-issuing corporation organized under or brought within the Stock Corporation Act. Va. Code § 13.1-691(A) reaches transactions between that corporation or one or more entities it controls and one or more of its directors, officers, or related persons.

The related-person definition is tied to a familial, financial, professional, or employment relationship with a director or officer that would reasonably be expected to impair that person's objectivity. The section does not separately define “controlled” or “material interest,” so this page does not decide whether a particular entity, interest, or relationship meets the trigger.

Board and shareholder disclosure are not identical

The board or committee route requires disclosure or knowledge of the material facts of the director's or officer's relationship or interest as to the transaction. It does not separately state that the board must receive every material transaction fact.

The shareholder route expressly requires disclosure to the disinterested shareholders of both the material transaction facts and the material facts of the relationship or interest. Unlike the board route, it does not state an alternative based on facts already being known. Neither route names the discloser, a fixed timing rule, a written form, or a confidential-information exception.

Disinterested-director approval needs a majority and at least two directors

The board or committee route requires an affirmative majority of the disinterested directors. Section 13.1-691(B) also says one director alone cannot authorize, approve, or ratify under the section. When the disinterested majority approves, a special conflict-purpose quorum exists.

Va. Code § 13.1-603 defines a disinterested director by financial interests and relationships reasonably expected to impair objective judgment at the time of action. Nomination by an interested person and common service with an interested director do not, standing alone, prevent disinterested status.

Va. Code § 13.1-690 separately requires a director to use good-faith business judgment in the corporation's best interests and puts the burden of proving a violation of that general duty on the person alleging it. That general standard is not an extra word inserted into § 13.1-691's conflict-vote formula.

The shareholder route removes specified material-interest shares

Shareholder approval requires a majority of the shares eligible to count, and a majority of those eligible shares forms the special quorum. The exclusion reaches shares owned by or voted under the control of a director, officer, or related person who has a material interest in the transaction, except an interest that would devolve on the corporation or shareholders generally.

Excluded shares still count when determining whether the transaction receives approval required elsewhere in the Act. Conflict-route approval therefore does not replace a separate transaction-authorization vote.

Shareholders and directors use different no-meeting mechanics

Va. Code § 13.1-657 defaults shareholder no-meeting action to signed consent by all holders entitled to vote. The articles may authorize less-than-unanimous consent, subject to statutory and document conditions, including the meeting minimum from every voting group and later notice to nonconsenting voting shareholders. A conflict approval must also respect § 13.1-691(C)'s eligible- share rule.

For the board, Va. Code § 13.1-685 requires every director to sign a consent describing the action and deliver it to the secretary unless the articles or bylaws require a meeting. The consent has meeting-action effect. Section 13.1-691 creates no special interested-director abstention or non-signature route for no-meeting action.

Fairness is a separate merits alternative

Section 13.1-691(A)(3) supplies a route when the transaction is fair to the corporation. It gives no measurement time, factor list, valuation method, or express allocation of the burden to establish or disprove fairness. This page therefore does not resolve the merits of a particular transaction.

Participation and involvement are part of the limited protection

The listed circumstances include receipt of a benefit, presence or participation in the authorizing board or committee meeting, involvement in initiation, negotiation, or approval, and a director's counted vote. A non-disinterested director's presence or vote does not affect otherwise compliant board action.

That protection does not turn an interested vote into a disinterested vote or remove the requirement for a disinterested majority. It also does not say participation is prudent or resolve independent fiduciary, authorization, or securities questions.

Compensation, investment companies, and business opportunities are separate

Va. Code § 13.1-683 generally lets the board fix director compensation unless the articles or bylaws provide otherwise. Va. Code § 13.1-690.1 has a narrow federal-status rule deeming a qualifying open-end management investment- company director disinterested.

Va. Code § 13.1-691.1 separately permits a director to present a business opportunity before becoming legally obligated and use the § 13.1-691 director or shareholder procedure for a corporate disclaimer. Not using that procedure does not itself create an adverse inference or alter the otherwise applicable burden on the claimed duty breach.

The statutory effect names relief, defendants, and reasons

When one of the three routes is satisfied, the transaction cannot be the subject of equitable relief or support damages against a director or corporate officers because of the covered circumstances, benefit, or listed involvement. The section does not declare universal validity, independent authorization, fairness, enforceability, or freedom from relief based on another ground.

Va. Code § 13.1-770 requires permanent minutes of shareholder and board meetings and permanent records of shareholder, board, and committee action without a meeting. Those records can preserve the approval process but do not by themselves establish interest, disinterested status, disclosure, fairness, or satisfaction of another claim.

What trips people up

The board route cannot be completed by one disinterested director, even if that person is the only disinterested board member. The statute requires a majority of the disinterested directors and expressly rejects single-director approval.

The shareholder exclusion is also narrower than excluding every share linked to a covered person. It applies when the director, officer, or related person has a material interest other than one devolving on the corporation or shareholders generally, and those shares still count for approvals under other Act sections.

Common questions

Does the statute cover officers who are not directors?

Yes. Section 13.1-691(A) expressly covers directors, officers, and related persons in a transaction with the corporation or an entity it controls.

May an interested director be present or vote?

The statute treats presence, participation, and a counted vote as covered circumstances and says a non-disinterested director's presence or vote does not affect otherwise compliant board approval. The approval majority itself must still be disinterested.

Does satisfying § 13.1-691 eliminate every remedy?

No. Its text addresses equitable relief and damages against a director or corporate officers because of the specified circumstances, benefit, or involvement. It does not eliminate relief based on every other statutory, fiduciary, authorization, governing-document, or securities ground.

Statutes and sources

• Va. Code §§ 13.1-603 and 13.1-691 — entity and disinterested-director definitions; covered transactions and persons; disclosure, approval, fairness, eligible shares, related persons, and statutory effect. Official definitions and official conflict section, accessed September 4, 2026.
• Va. Code §§ 13.1-657 and 13.1-685 — shareholder and board action without a meeting. Official shareholder-consent section and official board-consent section, accessed September 4, 2026.
• Va. Code §§ 13.1-683, 13.1-690 to 13.1-691.1 — compensation, general director standard, investment-company status, and business opportunities. Official current directors-and-officers article, accessed September 4, 2026.
• Va. Code § 13.1-770 — permanent corporate action records and permitted form. Official current section, accessed September 4, 2026.