Nonprofit Director Conflict Transaction Approval Rules in Arkansas
At a glance
| Governing act and covered transactions | 1993 Arkansas Nonprofit Corporation Act; applies to post-1993 corporations and electing older corporations (§§ 4-33-831(a), 4-33-1701) |
|---|---|
| Interest and related-person trigger | Direct/indirect interest; entity where director has material interest, is general partner, director, officer, or trustee (§ 4-33-831(a)-(b)) |
| Disclosure and knowledge | Material transaction and director-interest facts disclosed or known to board or members for approval routes (§ 4-33-831(a)(2)-(3)) |
| Board or committee approval | Majority of disinterested board directors AND at least majority of entire board; no committee approval route stated (§ 4-33-831(a)(2), (c)) |
| Member approval and vote | Informed members approve by majority of eligible votes; interested-director and specified entity-controlled votes excluded; eligible-vote majority quorum (§ 4-33-831(a)(3), (d)) |
| Fairness route and time | Fair to corporation when transaction entered into is independent protection (§ 4-33-831(a)(1)) |
| Interested participation and quorum | Board route requires majority of full board as well as disinterested majority; member quorum is majority of eligible voting power whether present or not (§ 4-33-831(c)-(d)) |
| Burden, effect, and separate authorization | No voidability or director liability if route met; excluded member votes count under other Act approval provisions (§ 4-33-831(a), (d)) |
| Special coverage and later changes | Pre-1994 corporation must elect 1993 Act in amended articles; articles, bylaws, board resolution may add conflict requirements (§§ 4-33-1701, 4-33-831(e)) |
Requirements one by one
Covered corporations and interests
The 1993 Act applies to corporations incorporated from January 1, 1994, and § 4-33-1701 lets an older corporation elect that Act by amending its articles. Within that Act, § 4-33-831(a) covers a director's direct or indirect interest. Subsection (b) includes an entity in which the director has a material interest or is a general partner, and an entity where the director is a director, officer, or trustee.
Board, member, and fairness routes
Section 4-33-831(a)(1) protects a transaction that was fair to the corporation when entered into. For the board route, subsection (a)(2) requires disclosure or knowledge of the material transaction and interest facts; subsection (c) then requires a majority of disinterested directors and at least a majority of the entire board. The member route in subsections (a)(3) and (d) uses informed approval by a majority of votes entitled to be counted, excluding the interested director's votes and votes controlled by the specified materially interested or general-partner entity.
What trips people up
Arkansas § 4-33-831(c) does not let a small group of disinterested directors supply conflict approval: their affirmative votes must reach a majority of the entire board. Under subsection (d), the excluded member votes count for approval under other parts of the Act even though they do not count for the conflict vote. Articles, bylaws, or a board resolution may add requirements under subsection (e).
Common questions
Does the 1993 rule automatically cover older Arkansas nonprofits?
No. Section 4-33-1701 applies the chapter to corporations incorporated from January 1, 1994 and permits pre-1994 corporations to elect coverage by amending their articles.
Does the conflict vote have its own member quorum?
Yes. Section 4-33-831(d) sets a quorum at a majority of eligible voting power, whether or not those votes are present.
Statutes and sources
- Ark. Code § 4-33-831 (1993 Act 1147 § 831): director conflict, vote routes, fairness, and effect. Official enrolled act, accessed 2026-10-02.
- Ark. Code § 4-33-1701 (1999 Act 26 § 1): chapter application to older corporations. Official enrolled act, accessed 2026-10-02.
Source links
Every statute quoted above, linked, with the date we checked it.
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