Nonprofit Director Conflict Transaction Approval Rules in Colorado

At a glance

Requirements one by one

Covered director relationships

Section 7-128-501(1) reaches a contract, transaction, or other financial relationship with a director, a party related to a director, or an entity in which a director is an officer, director, or financially interested. Subsection (5) defines related party to include specified relatives, an estate or trust with a beneficial interest, and an entity where a related party has a listed role or financial interest.

Disinterested board and member routes

Under § 7-128-501(3)(a), the board or committee must know or receive material facts about both the relationship or interest and the transaction. It must then act in good faith through an affirmative majority of disinterested directors, even if they are fewer than an ordinary quorum. Subsection (3)(b) instead permits voting members with the same facts to specifically authorize, approve, or ratify in good faith. For an ordinary member meeting, § 7-127-205(1), (3) supplies the voting-group quorum and favorable-vote default, subject to a greater applicable rule.

Fairness and statutory effect

Section 7-128-501(3)(c) lists fairness to the nonprofit as an alternative; it does not set a specific time for measuring fairness. A qualifying transaction cannot be voided, enjoined, set aside, or made the basis of the listed damages or sanctions in a member or derivative proceeding solely because of the director's covered connection, presence, participation, or counted vote.

What trips people up

Interested directors may count toward the board or committee quorum under § 7-128-501(4), while the board safe harbor still requires the affirmative majority of disinterested directors in subsection (3)(a). The ordinary board vote in § 7-128-205(3) remains a separate authorization question. And subsection (2) forbids loans to directors or officers, with participating directors or officers liable until repayment; the conflict routes do not authorize such loans.

Common questions

Is a director's sibling within the related-party definition?

Yes. Section 7-128-501(5) expressly includes a sibling, as well as the spouse or descendant of a sibling.

Does the statute require members to exclude a director's vote?

Section 7-128-501(3)(b) calls for a good-faith vote of the members entitled to vote after the material facts are known. It does not prescribe a separate interested-member exclusion for this conflict route.

Statutes and sources

• Colo. Rev. Stat. § 7-128-501(1)-(5): trigger, routes, remedies, quorum, related parties, and loans. Official 2026 Title 7 text, accessed 2026-10-02.
• Colo. Rev. Stat. § 7-127-205(1), (3): ordinary member voting-group quorum and vote. Official 2026 Title 7 text, accessed 2026-10-02.
• Colo. Rev. Stat. § 7-128-205(1), (3): ordinary board quorum and vote. Official 2026 Title 7 text, accessed 2026-10-02.