Nonprofit Director Conflict Transaction Approval Rules in Georgia

At a glance

Requirements one by one

When a conflict exists

Section 14-3-860(1) tests what the director knows at the time of commitment. It covers a director or related person who is a party or has the specified financial interest, and certain organizational relationships when the matter goes or ordinarily would go to the board. Under § 14-3-860(5), commitment can occur at consummation or earlier when withdrawal from a contract would cause significant loss, liability, or damage.

Qualified director approval

Section 14-3-862(a) requires a majority of qualified directors who vote, with at least two affirmative votes, after required disclosure or the narrow duty-based alternative. Subsection (d) excludes both a director with a conflicting interest and a director whose specified relationship with an interested director would reasonably influence judgment. Subsection (c) sets a quorum of a majority of qualified directors, also at least two; a nonqualified director's presence or vote does not undo an otherwise compliant action.

Qualified member approval

Under § 14-3-863(a), approval needs a majority of all votes entitled to be cast by qualified members, after notice describing the transaction, the required member information, and required disclosure to those who vote. Subsections (b)-(c) exclude an interested director-member and specified other controlled or interested member votes, and use the same qualified-vote denominator for quorum.

Fairness and statutory consequence

Section 14-3-861(b)(4) provides a fairness route judged in the circumstances at the time of commitment. When one of that section's routes is met, the director's interest alone cannot support an injunction, setting aside, damages, or other sanctions in the listed actions.

What trips people up

For the director route, § 14-3-862(b) allows a narrower disclosure only when the director and specified related persons are not parties and another legal, professional, or confidentiality duty prevents full disclosure. The director must explain the interest and the duty's limits before the vote and take no part in deliberations or voting. In a qualifying charitable corporation, § 14-3-864 also permits superior-court approval with the Attorney General joined when neither director nor member action was taken.

Common questions

Can one unconflicted director approve the transaction alone?

No. Section 14-3-862(a), (c) requires at least two qualified directors for the director approval and quorum route.

Is any financial connection enough to trigger this rule?

Section 14-3-860(1) specifies the director's knowledge, the type of connection, and financial significance or expected influence. Whether particular facts meet those terms depends on the transaction; a personal association alone does not substitute for the statutory trigger.

Statutes and sources

• Ga. Code § 14-3-860(1)-(2) and § 14-3-860(3)-(5): define “conflicting interest,” “related person,” “required disclosure,” and “time of commitment.” Official 2023 signed act, accessed 2026-10-02.
• Ga. Code § 14-3-861(b): a qualifying transaction “may not be enjoined, set aside, or give rise to an award of damages or other sanctions” on the stated interest ground. Official 2023 signed act, accessed 2026-10-02.
• Ga. Code § 14-3-862(a)-(d): qualified director vote, disclosure alternative, quorum, and qualification rules. Official 2023 signed act, accessed 2026-10-02.
• Ga. Code § 14-3-863(a)-(c): qualified member vote and quorum after notice and disclosure. Official 2023 signed act, accessed 2026-10-02.
• Ga. Code § 14-3-864 and 2024 Ga. S.B. 448 § 5(4): charitable superior-court route and later cross-reference correction. Official 2023 signed act; official 2024 signed act, accessed 2026-10-02.