Nonprofit Director Conflict Transaction Approval Rules in Louisiana
At a glance
| Governing act and covered transactions | Louisiana Nonprofit Corporation Law; director/officer transaction with corporation or overlapping organization (§ 12:228(A)) |
|---|---|
| Interest and related-person trigger | Director or officer is counterparty, serves as director/officer of other organization, or has financial interest there (§ 12:228(A)) |
| Disclosure and knowledge | Material facts of interest and transaction disclosed or known to board/committee or voting members for approval route (§ 12:228(A)(1)-(2)) |
| Board or committee approval | Good-faith board/committee authorization by vote sufficient without interested directors’ votes (§ 12:228(A)(1)) |
| Member approval and vote | Informed voting members approve in good faith; ordinary member quorum and majority of votes cast apply unless displaced (§§ 12:228(A)(2), 231, 232(G)) |
| Fairness route and time | Alternative if fair to corporation when board, committee, or members authorized, approved, or ratified (§ 12:228(A)(3)) |
| Interested participation and quorum | Interested presence, participation, or counted votes alone do not void qualifying transaction; interested directors count for board/committee quorum (§ 12:228(A), (B)) |
| Burden, effect, and separate authorization | No voidability solely for stated interest/participation/vote grounds when route met; ordinary board action uses majority at quorum (§§ 12:228(A), 224(E)(7)) |
| Special coverage and later changes | Section expressly reaches officers and overlapping nonprofit, business, or foreign organizations (§ 12:228(A)) |
Requirements one by one
Covered transactions and the safe routes
Section 12:228(A) covers contracts or transactions with a director or officer and transactions with another organization in which a director or officer holds office or has a financial interest. The transaction is protected against voidability solely for the listed interest, participation, or vote grounds when any of the three statutory conditions applies. The section does not say that disclosure alone supplies approval.
Board or committee route
For § 12:228(A)(1), the board or committee must know or receive the material facts about both the interest and the transaction. It must authorize in good faith by enough votes without counting the interested directors' votes. Section 12:224(E)(7) supplies the ordinary board quorum and voting rule; the conflict section does not replace that ordinary authorization rule.
Member route and fairness
Under § 12:228(A)(2), the voting members must know or receive both sets of material facts and approve in good faith. Unless the chapter or governing documents provide otherwise, § 12:231(1) calls for a majority of voting members present in person or by proxy for quorum, and § 12:232(G) decides a properly presented matter by a majority of votes actually cast. Separately, § 12:228(A)(3) protects a transaction that was fair to the corporation when the board, committee, or members authorized, approved, or ratified it.
What trips people up
An interested director can count toward the board or committee quorum under § 12:228(B), but the board-route tally in § 12:228(A)(1) must succeed without that director's vote. The statute also covers officers and overlapping nonprofit, business, or foreign organizations; its protection addresses only the specified grounds for voidability.
Common questions
Does a member vote need to exclude interested members?
Section 12:228(A)(2) requires informed, good-faith approval by members entitled to vote; it does not prescribe a separate disinterested-member tally. The ordinary member voting rule in § 12:232(G) applies unless displaced by the articles, bylaws, or another provision of the chapter.
Can fairness be established at ratification?
Yes. Section 12:228(A)(3) names the time the transaction was authorized, approved or ratified by the board, committee, or members.
Statutes and sources
- La. R.S. § 12:228(A)-(B): interest, approval paths, fairness, and quorum. Current official section, accessed 2026-10-02.
- La. R.S. § 12:224(E)(7): ordinary board quorum and action. Current official section, accessed 2026-10-02.
- La. R.S. § 12:231(1)-(2): member quorum. Current official section, accessed 2026-10-02.
- La. R.S. § 12:232(G): member vote. Current official section, accessed 2026-10-02.
Source links
Every statute quoted above, linked, with the date we checked it.
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