Nonprofit Director Conflict Transaction Approval Rules in South Carolina
At a glance
| Governing act and covered transactions | Nonprofit Corporation Act, Chapter 33-31; director-interest transaction, with public/religious versus mutual benefit routes (§ 33-31-831(a)-(c)) |
|---|---|
| Interest and related-person trigger | Direct or indirect interest; indirect if director has material interest/general-partner status in party entity or is its director/officer/trustee (§ 33-31-831(a), (d)) |
| Disclosure and knowledge | Material facts of transaction AND director interest known or disclosed to board/committee, or to mutual benefit voting members (§ 33-31-831(b)(1), (c)) |
| Board or committee approval | Public/religious: approving directors reasonably believe fairness in good faith; mutual: informed board/committee action; majority of directors without interest, at least two (§ 33-31-831(b)(1), (c)(1), (e)) |
| Member approval and vote | Mutual benefit only: informed members approve; majority of countable votes, excluding director-controlled and defined entity-controlled votes; countable voting-power majority is quorum (§ 33-31-831(c)(2), (f)) |
| Fairness route and time | Fair at time entered into is independent protection; public/religious board approvers need good-faith reasonable belief of fairness (§ 33-31-831(a), (b)(1)(ii)) |
| Interested participation and quorum | Disinterested board-majority vote supplies conflict quorum; interested director presence/vote does not invalidate qualifying board action (§ 33-31-831(e)) |
| Burden, effect, and separate authorization | Not voidable or basis for director liability if fair at entry or approved as stated; interested votes count for other chapter member approvals; ordinary board voting separate (§§ 33-31-831(a), (f), 33-31-824(b)) |
| Special coverage and later changes | Public/religious route also allows Attorney General or Richland County circuit court approval, before or after consummation; documents/board may add rules (§ 33-31-831(b)(2), (g)) |
Requirements one by one
Direct and indirect interests
Section 33-31-831(a) covers a transaction in which a director has a direct or indirect interest. Subsection (d) specifies an indirect interest when another party entity has the director as general partner, director, officer, or trustee, or the director has a material interest in that entity.
Public benefit and religious corporation routes
For these corporations, § 33-31-831(b)(1) permits board or committee authorization, approval, or ratification after material facts about both the transaction and director's interest are disclosed or known. The approving directors must in good faith reasonably believe the transaction is fair to the corporation. Under subsection (e), approval needs an affirmative majority of directors without a direct or indirect interest; a single director cannot give this approval.
Mutual benefit corporation routes
Section 33-31-831(c) allows informed board or committee action or informed member authorization, approval, or ratification. For the member route, subsection (f) requires a majority of votes entitled to be counted and excludes votes cast by or controlled by the interested director or specified interested entity. A majority of countable voting power supplies the conflict-action quorum, whether or not present.
What trips people up
The independent protection in § 33-31-831(a) asks whether the transaction was fair when entered into. For a public benefit or religious corporation, subsection (b)(2) separately allows approval by the Attorney General or the Richland County circuit court with the Attorney General joined, before or after consummation. Under subsection (e), interested director presence or a vote does not spoil an otherwise qualifying board action, but the disinterested-majority condition still controls. Subsection (g) permits additional requirements in articles, bylaws, or board resolution.
Common questions
Can an interested member's vote count for an ordinary approval?
Section 33-31-831(f) excludes the specified votes from the conflict approval count, but expressly counts those members' votes when determining approval under other sections of the chapter.
Does this section decide every ground of director liability?
Section 33-31-831(a) protects against voidability or liability on the stated fairness or approval conditions for a conflict transaction. Its text does not decide unrelated claims.
Statutes and sources
- S.C. Code § 33-31-831(a)-(g): conflict trigger, public/religious and mutual benefit routes, votes, fairness, and effect. Current official chapter, accessed 2026-10-02.
- S.C. Code § 33-31-824(a)-(b): ordinary board quorum and voting. Current official chapter, accessed 2026-10-02.
Source links
Every statute quoted above, linked, with the date we checked it.
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