Nonprofit Director Conflict Transaction Approval Rules in Montana
At a glance
| Governing act and covered transactions | Montana Nonprofit Corporation Act; transaction with corporation in which a director has direct/indirect interest (§ 35-2-418(1)) |
|---|---|
| Interest and related-person trigger | Director direct/indirect interest; indirect if another party entity involves director material interest/general-partner or director/officer/trustee role (§ 35-2-418(1), (4)) |
| Disclosure and knowledge | Transaction and director-interest material facts disclosed or known to board/committee; mutual member route requires the same for members (§ 35-2-418(2)(a), (3)) |
| Board or committee approval | Majority of directors without direct/indirect interest; one director cannot alone approve; public/religious advance vote also needs good-faith reasonable fairness belief (§ 35-2-418(2)(a), (5)) |
| Member approval and vote | Mutual benefit only: informed members, majority of eligible votes; interested director and specified entity-controlled votes excluded (§ 35-2-418(3)(b), (6)) |
| Fairness route and time | Independent fairness when entered; public/religious advance board approval requires good-faith reasonable belief in fairness (§ 35-2-418(1), (2)(a)) |
| Interested participation and quorum | Interested director presence/vote does not invalidate compliant board action; disinterested-board majority supplies conflict-action quorum (§ 35-2-418(5)) |
| Burden, effect, and separate authorization | Not voidable or director-liability basis when fair or approved; excluded member votes still count under other chapter sections (§ 35-2-418(1), (6)) |
| Special coverage and later changes | Public/religious corporations may get attorney general or joined district-court approval before/after consummation; governing documents or board resolution may add requirements (§ 35-2-418(2)(b), (7)) |
Requirements one by one
Director interest and board action
Section 35-2-418(1), (4) covers a director's direct or indirect interest, including specified interests or roles in another party entity. A board or committee conflict approval requires a majority of directors without a direct or indirect interest; one director cannot approve alone. The disinterested-board majority supplies the quorum for this section (§ 35-2-418(5)).
For a public benefit or religious corporation, § 35-2-418(2)(a) requires the informed board or committee vote in advance and a good-faith reasonable belief that the transaction is fair. Section 35-2-418(2)(b) separately allows attorney general approval or district-court approval in an action joining the attorney general, before or after consummation.
Mutual benefit corporation
Section 35-2-418(3) allows a mutual benefit corporation's informed board or committee to authorize, approve, or ratify the transaction, or informed members to do so. For the member route, § 35-2-418(6) requires a majority of countable votes. Votes cast or controlled by the interested director or the specified materially linked entity are excluded from that conflict vote, while still counting under other chapter provisions. The conflict-vote quorum is a majority of eligible voting power, present or not.
What trips people up
Section 35-2-418(1) separately protects a transaction fair when entered into. Under subsection (5), an interested director's presence or vote does not undo an otherwise compliant board action. Articles, bylaws, or a board resolution can impose more requirements (§ 35-2-418(7)).
Common questions
Can a religious corporation use the same route as a public benefit corporation?
Yes. Section 35-2-418(2) names both categories for its advance board vote and attorney general or joined-court alternatives.
Does an interested member vote count for ordinary approval?
Section 35-2-418(6) excludes specified interested votes from the mutual benefit conflict vote but expressly counts them when determining approval under other chapter sections.
Statutes and sources
- Mont. Code Ann. § 35-2-418(1)–(7): interest, approval, votes, fairness, and effect. Official section, accessed 2026-10-02.
Source links
Every statute quoted above, linked, with the date we checked it.
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