Nonprofit Director Conflict Transaction Approval Rules in Indiana
At a glance
| Governing act and covered transactions | Indiana Nonprofit Corporation Act; corporation-person or corporation-other-entity contract/transaction (§ 23-17-13-2.5(b)) |
|---|---|
| Interest and related-person trigger | Member, director, officer, or designated-body member counterparty or holds listed role/financial interest in other entity (§ 23-17-13-2.5(b)) |
| Disclosure and knowledge | Material relationship/interest and contract/transaction facts disclosed or known to board or voting members on respective route (§ 23-17-13-2.5(c)(1)-(2)) |
| Board or committee approval | Good-faith board authorization by majority of disinterested directors, even if fewer than quorum; no committee route stated (§ 23-17-13-2.5(c)(1)) |
| Member approval and vote | Voting members specifically approve in good faith after facts disclosed/known; no separate disinterested-member denominator stated (§ 23-17-13-2.5(c)(2)) |
| Fairness route and time | Independent fair-to-corporation route at board/member authorization, approval, or ratification (§ 23-17-13-2.5(c)(3)) |
| Interested participation and quorum | Common or interested directors count toward board-meeting quorum; presence, participation, or counted vote alone does not void protected contract (§ 23-17-13-2.5(b), (d)) |
| Burden, effect, and separate authorization | Not void/voidable solely for listed relationship, interest, presence, participation, or vote on a listed route; section assigns no proof burden (§ 23-17-13-2.5(b)-(c)) |
| Special coverage and later changes | Articles or bylaws may provide otherwise; designated-body members expressly covered (§ 23-17-13-2.5(a)-(b)) |
Requirements one by one
People and interests covered
Section 23-17-13-2.5(b) includes a contract directly between the nonprofit and a member, director, designated-body member, or officer. It also includes a contract with another entity when one of those people has a listed governance position, similar position, or financial interest there. The articles or bylaws can supply a different rule under subsection (a).
Disclosure and board vote
Under § 23-17-13-2.5(c)(1), the board must know or receive the material facts of both the relationship or interest and the proposed contract or transaction. It then authorizes in good faith by an affirmative majority of disinterested directors, even if those directors are fewer than a quorum. The section states this as a board route; it does not name a committee route.
Member vote and fairness
Section 23-17-13-2.5(c)(2) allows members entitled to vote to approve the contract specifically and in good faith after the same categories of material facts are disclosed or known. It states no special disinterested-member voting formula. Subsection (c)(3) offers a separate fairness route, measured when the board or members authorize, approve, or ratify the contract or transaction.
What trips people up
Section 23-17-13-2.5(d) permits common or interested directors to count toward the board-meeting quorum. That does not change subsection (c)(1)'s requirement that a majority of disinterested directors affirmatively approve the disclosed board route. The protection in subsection (b) is against voidability solely because of the listed relationship, interest, presence, participation, or counted vote; it does not decide unrelated defects.
Common questions
Does the rule apply to an officer's transaction?
Yes. Section 23-17-13-2.5(b) names officers, as well as members, directors, and members of a designated body.
Must the fairness route use the same disclosure vote?
No. Section 23-17-13-2.5(c) lists fairness in subdivision (3) as an alternative to the disclosed board and member vote routes in subdivisions (1) and (2).
Statutes and sources
- Ind. Code § 23-17-13-2.5(a)-(d): covered people and transactions, three protection routes, and interested-director quorum treatment. Official 2026 chapter text, accessed 2026-10-02.
Source links
Every statute quoted above, linked, with the date we checked it.
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