Nonprofit Director Conflict Transaction Approval Rules in Utah
At a glance
| Governing act and covered transactions | Utah Revised Nonprofit Corporation Act; contract, transaction, or other financial relationship (§ 16-6a-825(1)) |
|---|---|
| Interest and related-person trigger | Director, related party, or entity where director is director/officer or has financial interest; related natural person influence test (§ 16-6a-825(1), (6)) |
| Disclosure and knowledge | Board/committee or voting members must know material relationship/interest and transaction facts for approval route (§ 16-6a-825(4)(b)(i)-(ii)) |
| Board or committee approval | Good-faith authorization, approval, or ratification by majority of disinterested directors, even below quorum (§ 16-6a-825(4)(b)(i)) |
| Member approval and vote | Informed members specifically approve in good faith; ordinary voting-group quorum/vote rule applies unless displaced (§§ 16-6a-825(4)(b)(ii), 16-6a-714(1), (3)) |
| Fairness route and time | Fair to nonprofit corporation is independent route; subsection states no measurement time (§ 16-6a-825(4)(b)(iv)) |
| Interested participation and quorum | Interested directors count for board/committee quorum; presence, participation, counted votes alone do not defeat qualifying protection (§ 16-6a-825(4)(a), (5)) |
| Burden, effect, and separate authorization | No listed interest-based voidability, injunction, setting aside, damages, or sanctions in specified proceedings when route met (§ 16-6a-825(4)(a)-(b)) |
| Special coverage and later changes | Governing-document nonprofit-support route; separate ban on specified loans and participant liability (§ 16-6a-825(3), (4)(b)(iii)) |
Requirements one by one
Covered relationships and protection
Section 16-6a-825(1) reaches a contract, transaction, or other financial relationship with a director, a related party, or an entity where the director holds office or has a financial interest. Subsection (6) defines a related natural person by a relationship reasonably expected to influence the director's or officer's judgment when voting. Subsection (4) protects a qualifying transaction against the listed remedies solely for the stated interest, participation, or vote grounds in the specified member or derivative proceedings.
Approval, support provision, or fairness
Under § 16-6a-825(4)(b)(i), the board or committee must know or receive material facts about the relationship or interest and the transaction, then act in good faith by a majority of disinterested directors, even below a quorum. The member route in subsection (4)(b)(ii) likewise requires informed, good-faith, specific authorization, approval, or ratification. For ordinary voting-group action, § 16-6a-714(1), (3) uses members represented at the meeting as quorum unless displaced and requires votes favoring to exceed votes opposing, subject to a greater required vote.
Subsection (4)(b)(iii) independently covers a transaction consistent with articles or bylaws committing support to another nonprofit, charitable trust, or charitable entity, or authorizing directors to choose gifts or contributions to those entities. Subsection (4)(b)(iv) supplies fairness to the nonprofit corporation as another independent route.
What trips people up
Section 16-6a-825(5) lets interested directors count for a board or committee quorum; the disinterested-majority approval tally remains separate. Subsection (3) separately prohibits direct or indirect loans to specified directors, officers, related natural people, or entities in which they have an ownership, management, or financial interest, and makes a participating director or officer liable to the corporation for the loan amount until repayment. A conflict-route vote does not erase that loan rule.
Common questions
Does fairness have to be shown at a stated time?
Section 16-6a-825(4)(b)(iv) states the fairness route without fixing a particular measurement date.
Can interested directors count toward the meeting quorum?
Yes. Section 16-6a-825(5) permits common or interested directors to count for board or committee quorum, while subsection (4)(b)(i) requires a disinterested majority for its approval route.
Statutes and sources
- Utah Code § 16-6a-825(1)-(6): covered conflicts, routes, effect, quorum, and loan ban. Current official section, accessed 2026-10-02.
- Utah Code § 16-6a-714(1), (3): ordinary member voting-group rules. Current official section, accessed 2026-10-02.
Source links
Every statute quoted above, linked, with the date we checked it.
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