Nonprofit Director Conflict Transaction Approval Rules in North Carolina

At a glance

Requirements one by one

Covered interests and effect

Section 55A-8-31(a) applies when a director has a direct or indirect interest in a transaction with the corporation. Under § 55A-8-31(b), indirect interests include a material financial interest, general-partner status, or a director, officer, or trustee role in the other party where the matter is or should be before the board. The statute's protection is that the corporation cannot void the transaction solely because of that director's interest when a listed condition is met.

Board or committee approval

Section 55A-8-31(c) requires affirmative votes from a majority of directors without a direct or indirect interest; one director alone cannot approve under this route. That disinterested-majority vote establishes the quorum for the conflict action, and an interested director's presence or vote does not defeat action that otherwise satisfies the section.

Member approval and fairness

Under § 55A-8-31(d), the member route needs a majority of votes entitled to be counted, after the material facts described in subsection (a)(2) were disclosed or known. Votes cast or controlled by the interested director or specified other entity are excluded for this conflict vote. Section 55A-8-31(a)(3) also provides an alternative when the transaction was fair to the corporation, without specifying a particular assessment time.

What trips people up

The excluded member votes under § 55A-8-31(d) do count when asking whether another section of Chapter 55A approved the transaction. A conflict vote and any separate ordinary member approval therefore have different vote counts. The articles, bylaws, or board resolution can also add conditions under subsection (e).

Common questions

Does this rule authorize a loan to a director or officer?

Section 55A-8-32 separately restricts loans, guaranties, and other security for directors or officers. Its stated exception covers a full-time employee who is also a director or officer, with board action under § 55A-8-31(a)(1).

Can the corporation impose a stricter conflict procedure?

Yes. Section 55A-8-31(e) expressly allows additional requirements in the articles, bylaws, or a board resolution.

Statutes and sources

• N.C. Gen. Stat. § 55A-8-31(a)-(b): defines the director's conflict and says a qualifying transaction “is not voidable by the corporation solely because of the director's interest.” Official Chapter 55A, accessed 2026-10-02.
• N.C. Gen. Stat. § 55A-8-31(c)-(d): disinterested director, member-vote, and quorum mechanics. Official Chapter 55A, accessed 2026-10-02.
• N.C. Gen. Stat. § 55A-8-31(e): governing documents or board resolution may add requirements. Official Chapter 55A, accessed 2026-10-02.
• N.C. Gen. Stat. § 55A-8-32: separate loan and guaranty restriction with a stated full-time-employee exception. Official Chapter 55A, accessed 2026-10-02.