Nonprofit Director Conflict Transaction Approval Rules in North Dakota
At a glance
| Governing act and covered transactions | Nonprofit Corporations Act; corporation contract/transaction involving director, family, related-organization director/family, or linked organization (§ 10-33-46(1)) |
|---|---|
| Interest and related-person trigger | Family spouse/parent/child/stepchild/sibling and their specified spouses; linked organization through fiduciary role or material financial interest (§ 10-33-46(1), (3)) |
| Disclosure and knowledge | Material contract/transaction facts and director interest fully disclosed or known to voting members or board/committee (§ 10-33-46(2)(b)–(c)) |
| Board or committee approval | Good-faith majority of directors/committee members currently holding office; interested director cannot vote or count for quorum; residual voters form reduced quorum if needed (§ 10-33-46(2)(c)) |
| Member approval and vote | Good-faith two-thirds of members entitled to vote excluding interested director vote, or unanimous affirmative vote of all members whether entitled to vote or not (§ 10-33-46(2)(b)) |
| Fairness route and time | Alternative fair and reasonable to corporation when authorized, approved, or ratified; validity proponent bears burden (§ 10-33-46(2)(a)) |
| Interested participation and quorum | Interested presence does not alone void contract, but interested director cannot vote or count toward board/committee quorum on approval route (§ 10-33-46(1), (2)(c)) |
| Burden, effect, and separate authorization | Not void/voidable for specified relationship/presence if subsection 2 condition met; fairness route puts burden on validity proponent (§ 10-33-46(1)–(2)) |
| Special coverage and later changes | Qualifying § 10-33-85 merger/consolidation is separate condition; related-organization transaction exempt from subsection 2(a)–(c) procedures (§ 10-33-46(2)(d), (4)) |
Requirements one by one
Who is covered and how approval works
Section 10-33-46(1) reaches a contract or transaction involving a nonprofit director, a specified family member, a related organization's director or family member, or another organization linked to the corporation's director through a role or material financial interest. Subsection (3) defines “member of the family” and clarifies material financial interests in another organization.
The board or committee route requires full disclosure or knowledge of material transaction facts and the director's interest, then a good-faith affirmative vote of a majority of directors or committee members currently holding office. An interested director cannot vote or count toward quorum. If excluding interested directors leaves fewer than the normal quorum, the remaining directors or committee members form the quorum for that transaction (§ 10-33-46(2)(c)).
The member route requires the same material facts to be fully disclosed or known, then either a good-faith two-thirds vote of members entitled to vote, without the interested director's vote, or a unanimous affirmative vote of all members, including those otherwise not entitled to vote (§ 10-33-46(2)(b)).
What trips people up
Fairness is another route, tested when the deal was authorized, approved, or ratified. The person asserting validity bears the burden of showing it was fair and reasonable to the corporation (§ 10-33-46(2)(a)). A qualifying merger or consolidation under § 10-33-85 is a separate listed condition (§ 10-33-46(2)(d)). Subsection (4) relieves transactions between related organizations from the approval and fairness procedures in subsection (2)(a)–(c); § 10-33-01(32) defines that relationship through control or common control.
Common questions
May an interested director attend the meeting?
Presence alone does not void a qualifying transaction under § 10-33-46(1). On the board approval route, the director cannot vote or count toward the quorum (§ 10-33-46(2)(c)).
Is a two-thirds member vote the only member route?
No. Section 10-33-46(2)(b) also allows the unanimous affirmative vote of all members, whether or not otherwise entitled to vote.
Statutes and sources
- N.D. Cent. Code § 10-33-46(1)–(4): covered interests, fairness, votes, effect, and related-organization exception. Official chapter, section search, accessed 2026-10-02.
- N.D. Cent. Code § 10-33-01(32): related-organization definition. Official chapter, section search, accessed 2026-10-02.
Source links
Every statute quoted above, linked, with the date we checked it.
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