Nonprofit Director Conflict Transaction Approval Rules in Illinois

At a glance

Requirements one by one

Fairness and statutory effect

Section 108.60(a) protects a transaction fair to the corporation at the time it is authorized, approved, or ratified from invalidation based on a director being directly or indirectly a party. That is the statute's stated consequence of fairness; it does not determine other grounds for contesting a transaction.

Disclosure and approval

In a validity challenge, § 108.60(b) places the burden of proving fairness on the person asserting validity unless one of two approval conditions applies. The material facts of both the transaction and the director's interest or relationship must be disclosed or known. The board or a committee consisting entirely of directors can authorize, approve, or ratify by a majority of disinterested directors, even if they are fewer than a quorum. Alternatively, members entitled to vote can act without counting the vote of a member who is an interested director.

Interested directors in the room

Section 108.60(c) counts an interested director's presence toward quorum but excludes that director when the board or committee takes action on the transaction. For example, presence can help establish that a meeting is valid while the approving vote still needs the disinterested directors required by § 108.60(b)(1).

What trips people up

The indirect-party definition in § 108.60(d) covers a director's material financial interest or officer, director, or general-partner role in the other party. It excludes a narrower situation: an uncompensated grant or contribution between two entities with a common director or officer, where that person has no material financial interest in the recipient. The exception applies to that indirect-party definition; it does not itself authorize a transaction.

Common questions

Does approval prove the transaction is fair?

Section 108.60(b) says the person asserting validity has the burden of proving fairness unless the specified disclosed approval occurs. It does not say approval is a finding that the transaction was fair; § 108.60(a) separately describes fairness and its effect.

Does a shared director always make a grant an indirect-party transaction?

No. Section 108.60(d) excludes a grant or contribution made without consideration between entities with a common director or officer if that person has no material financial interest in the recipient.

Statutes and sources

• 805 ILCS 105/108.60(a): “If a transaction is fair to a corporation at the time it is authorized, approved, or ratified,” director participation “is not grounds for invalidating the transaction.” Official section text, accessed 2026-10-02.
• 805 ILCS 105/108.60(b): “the person asserting validity has the burden of proving fairness unless” the specified board, committee, or member approval follows disclosure or knowledge. Official section text, accessed 2026-10-02.
• 805 ILCS 105/108.60(c): an interested director “may be counted in determining whether a quorum is present but may not be counted” when the board or committee acts. Official section text, accessed 2026-10-02.
• 805 ILCS 105/108.60(d): the indirect-party definition covers certain ties to the other entity and states an exception for a qualifying uncompensated grant or contribution. Official section text, accessed 2026-10-02.