Nonprofit Director Conflict Transaction Approval Rules in Rhode Island
At a glance
| Governing act and covered transactions | Rhode Island Nonprofit Corporation Act; contract/transaction with director/officer or another organization linked through role or financial interest (§ 7-6-26.1(a)) |
|---|---|
| Interest and related-person trigger | Director/officer is party, serves as director/officer of other party organization, or has financial interest there (§ 7-6-26.1(a)) |
| Disclosure and knowledge | Interest or relationship material facts disclosed or known to board/committee or voting members (§ 7-6-26.1(a)(1)–(2)) |
| Board or committee approval | Affirmative majority of disinterested directors authorizes, approves, or ratifies, even below ordinary quorum (§ 7-6-26.1(a)(1)) |
| Member approval and vote | Members entitled to vote, informed of material interest/relationship facts, specifically authorize, approve, or ratify by vote (§ 7-6-26.1(a)(2)) |
| Fairness route and time | Alternative if contract or transaction is fair and reasonable to corporation; no particular measuring date stated (§ 7-6-26.1(a)(3)) |
| Interested participation and quorum | Interested director presence, participation, or counted vote does not alone defeat protection; interested directors count for board/committee quorum (§ 7-6-26.1(a), (b)) |
| Burden, effect, and separate authorization | Not void or voidable, and directors/officers not liable, solely for covered interest, participation, or counted vote if one route satisfied (§ 7-6-26.1(a)) |
| Special coverage and later changes | Applies to directors and officers; same § 7-6-26.1(a) routes govern the covered corporation |
Requirements one by one
Three statutory routes
Section 7-6-26.1(a) covers a transaction with a director or officer, or another organization in which a director or officer serves in that role or has a financial interest. One route requires that the material facts of the fiduciary's interest or relationship be disclosed or known to the board or committee, followed by an affirmative majority of disinterested directors even if that group is below an ordinary quorum (§ 7-6-26.1(a)(1)).
A second route permits the members entitled to vote on the transaction to authorize, approve, or ratify it after those material interest or relationship facts are disclosed or known (§ 7-6-26.1(a)(2)). The third route is that the transaction is fair and reasonable to the corporation (§ 7-6-26.1(a)(3)).
What trips people up
The section protects against voidability or liability solely because of the specified interest or relationship, or because an interested fiduciary attends, participates, or has a vote counted at the board or committee meeting. Other transaction defects remain distinct (§ 7-6-26.1(a)). Subsection (b) permits interested directors to count toward a board or committee quorum.
Common questions
Must disinterested directors make up a normal board quorum?
No. Section 7-6-26.1(a)(1) accepts a majority of disinterested directors even when they are fewer than a quorum.
Does the fairness route specify a measuring date?
Section 7-6-26.1(a)(3) says the contract or transaction must be fair and reasonable to the corporation; it states no particular date for that test.
Statutes and sources
- R.I. Gen. Laws § 7-6-26.1(a)–(b): covered transactions, approval, fairness, quorum, 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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