Corporate Interested-Director Transaction Requirements in Washington

At a glance

Requirements one by one

The trigger is defined at the time of commitment

Wash. Rev. Code § 23B.08.700 covers an effected or proposed transaction by the corporation, a subsidiary, or another entity in which the corporation has a controlling interest. A director has a conflicting interest when the director knows at commitment time of listed party status, a beneficial financial interest, or another financially significant close link reasonably expected to influence the director's judgment.

For a transaction brought or normally significant enough to be brought before the board, the definition also reaches listed ties through another entity, control or common control, or an individual who is the director's general partner, principal, or employer. The detailed related-person definition covers specified family, household, trust, estate, and fiduciary ties, with an expanded entity and business-relationship list for the business-opportunity section.

“Time of commitment” is when the transaction becomes effective or, for a contract, when unilateral withdrawal would entail significant loss, liability, or other damage. That time fixes both the conflict-knowledge inquiry and the fairness measurement.

Required disclosure includes interest and material subject-matter facts

Required disclosure is made by the conflicted director. It includes the existence and nature of the conflict and every fact known to the director about the transaction's subject matter that an ordinarily prudent person would reasonably believe material to deciding whether to proceed.

The qualified-director route accepts disclosure to the extent the information was not already known. A narrow alternative applies when neither the director nor specified related persons are parties and a legal, professional, or other confidentiality duty prevents full subject-matter disclosure. The director must disclose the conflict and the duty's character and limits before the vote, then play no direct or indirect part in deliberations or voting.

Qualified-director action requires at least two

Under Wash. Rev. Code § 23B.08.720, the transaction needs the affirmative vote of a majority, but no fewer than two, of the qualified directors who vote after the required disclosure or qualifying modified disclosure. A committee must be entirely qualified and contain either all the board's qualified directors or members appointed by a majority of them.

A majority, but never fewer than two, of all qualified directors on the board or committee forms the special quorum. Nonqualified-director presence or voting does not affect otherwise compliant action, but those votes do not become part of the qualified majority.

Section 23B.01.400 defines a qualified director by the absence of both the director's own conflict and an influence-expected familial, financial, professional, or employment relationship with a second conflicted director. The general good-faith, prudent-care, and best-interest duties in RCW 23B.08.300 remain separate from the conflict vote.

Qualified-share approval uses outstanding eligible voting power

Wash. Rev. Code § 23B.08.730 requires a majority of all votes entitled to be cast by qualified shares, not merely a majority of votes actually cast. The same qualified-share voting-power majority forms the special quorum.

The secretary or other authorized tabulator excludes shares known before the vote to be beneficially owned or vote-controlled by the conflicted director or a related person. The director must identify the number and holders or controllers of all such known shares before the shareholder vote.

If the vote fails only because the director omitted that identification, a court has tailored discretion when the director establishes that the omission neither determined nor was intended to influence the result. That is not an automatic cure.

Shareholder notice and conflict disclosure are cumulative

Before shareholder approval, the corporation gives notice describing the conflicting-interest transaction, provides the director's share-identification information, and makes required disclosure to the shareholders voting to the extent they do not already know it. Holders or votes of nonqualified shares do not otherwise affect a compliant action, subject to the share-identification and court-discretion provisions.

Wash. Rev. Code § 23B.07.040 gives properly executed shareholder consents the effect of a meeting vote. Unanimous consent is available, and the articles may authorize the meeting-minimum alternative. Using that general mechanism does not remove § 23B.08.730's notice, disclosure, identification, qualified-share, quorum, and approval requirements.

Fairness is judged at the defined commitment time

The third route applies when the transaction is established as fair to the corporation under the circumstances at the time of commitment. Section 23B.08.710 does not list valuation factors or expressly identify the person who bears that burden, and this cell does not decide whether a transaction is fair.

Ordinary board consent still requires every director

Wash. Rev. Code § 23B.08.210 makes ordinary no-meeting board action dependent on approval by all board members through executed consents delivered for the minutes or corporate records. A consent has meeting-vote effect. The conflict provisions do not create a special route under which an interested director can simply omit a required consent.

At a meeting, by contrast, a nonqualified director may be present or vote without defeating otherwise compliant qualified-director action. The qualified vote and quorum remain those of § 23B.08.720.

Compensation and business opportunities have separate rules

Wash. Rev. Code § 23B.08.110 generally lets the board fix director compensation unless the articles or bylaws provide otherwise. It does not supply the ordinary conflicting-interest transaction's disclosure and qualified-vote procedure.

Wash. Rev. Code § 23B.08.735 separately covers a director, officer, or related person pursuing a business opportunity. Timely presentation and a qualified- director or shareholder disclaimer can produce the section's stated effect, using all then-known material opportunity facts rather than § 23B.08.700's ordinary required disclosure. Article provisions limiting or eliminating the duty are another branch with officer-specific qualified-board approval.

The statutory effect is reason-specific

Under Wash. Rev. Code § 23B.08.710, a transaction that is not a defined director conflict cannot be enjoined, set aside, or support damages or other sanctions merely because a director or associate has an interest. A defined conflict transaction receives the same interest-based limitation when one of the three statutory routes is satisfied.

The provision does not declare universal authorization, validity, fairness, enforceability, or immunity from another legal ground. Wash. Rev. Code § 23B.16.010 separately requires permanent meeting, consent, and delegated- committee records; the record alone does not prove a conflict definition, disclosure, qualification, vote count, or fairness.

What trips people up

Washington uses two different majorities. The board route is a majority of qualified directors who vote, with an absolute two-director floor. The shareholder route is a majority of all votes entitled to be cast by qualified shares, which is an outstanding eligible-voting-power denominator rather than a votes-cast denominator.

The modified confidentiality route is also conditional. It is unavailable when the director or specified close related person is a party, and it requires both limited disclosure before the vote and complete nonparticipation in the qualified directors' deliberation and vote.

Common questions

May one qualified director approve the transaction?

No. Section 23B.08.720 requires a qualified-director majority but expressly sets a floor of two for both the approval vote and the special quorum.

Do shares controlled by the conflicted director count?

Not in the qualified-share approval when the secretary or tabulator knows before the vote that the conflicted director or a related person beneficially owns or controls the vote of those shares. Section 23B.08.730 supplies a narrow court-discretion provision for a director's qualifying identification failure.

Does a compliant route make the transaction valid for every purpose?

No. The statute limits injunction, set-aside, damages, or sanctions because of the director's or associate's interest. It does not decide independent authorization, governing-document compliance, fiduciary duties, securities law, or relief based on another ground.

Statutes and sources

• Wash. Rev. Code § 23B.01.400(42) — qualified-director definition. Official current section, accessed September 4, 2026.
• Wash. Rev. Code §§ 23B.08.700 to 23B.08.735 — definitions, judicial effect, directors' action, shareholders' action, and business opportunities; §§ 23B.08.110, 23B.08.210, and 23B.08.300 — compensation, board consent, and general standards. Official current Chapter 23B.08, accessed September 4, 2026.
• Wash. Rev. Code § 23B.07.040 — shareholder action without a meeting or vote. Official current section, accessed September 4, 2026.
• Wash. Rev. Code § 23B.16.010 — permanent corporate action records. Official current section, accessed September 4, 2026.