Conflict of interest standards for directors.

(1) As used in this section, the following terms and definitions apply:

(a) “Director’s conflict of interest transaction” means a transaction between a corporation and one or more of its directors, or another entity in which one or more of the corporation’s directors are directly or indirectly a party to the transaction, other than being an indirect party as a result of being a member of the corporation, and have a direct or indirect material financial interest or other material interest.

(b) “Fair to the corporation” means that the transaction, as a whole, is beneficial to the corporation and its members, taking into appropriate account whether it is:

1. Fair in terms of the director’s dealings with the corporation in connection with that transaction; and

2. Comparable to what might have been obtainable in an arm’s length transaction.

(c) “Family member” includes any of the following:

1. The director’s spouse.

2. A child, stepchild, parent, stepparent, grandparent, sibling, step sibling, or half sibling of the director or the director’s spouse.

(d) A director has an “indirect material financial interest” if a director’s family member has a material financial interest in the transaction, other than having an indirect interest as a member of the corporation, or if the transaction is with an entity, other than the corporation, which has a material financial interest in the transaction and controls, or is controlled by, the director or another person specified in this section.

(e) A director is “indirectly” a party to a transaction if the director has a material financial interest in or is a director, officer, member, manager, or partner of a person, other than the corporation, who is a party to the transaction.

(f) “Material financial interest” or “other material interest” means a financial or other interest in the transaction that would reasonably be expected to impair the objectivity of a director’s judgment when participating in the action on the authorization of the transaction.

(2) If a director’s conflict of interest transaction is fair to the corporation at the time it is authorized, approved, effectuated, or ratified:

(a) Such transaction is not void or voidable; and

(b) The fact that the transaction is a director’s conflict of interest transaction is not grounds for any equitable relief, an award of damages, or other sanctions, because of that relationship or interest, because such director or directors are present at the meeting of the board of directors or a committee thereof which authorizes, approves, or ratifies such transaction, or because such directors or their votes are counted for such purpose.

(3)(a) In a proceeding challenging the validity of a director’s conflict of interest transaction or in a proceeding seeking equitable relief, award of damages, or other sanctions with respect to a director’s conflict of interest transaction, the person challenging the validity or seeking equitable relief, award of damages, or other sanctions has the burden of proving the lack of fairness of the transaction if:

1. The material facts of the transaction and the director’s interest in the transaction were disclosed or known to the board of directors or committee that authorizes, approves, or ratifies the transaction and the transaction was authorized, approved, or ratified by a vote of a majority of the qualified directors, even if the qualified directors constitute less than a quorum of the board or the committee; however, the transaction may not be authorized, approved, or ratified under this subsection solely by a single director; or

2. The material facts of the transaction and the director’s interest in the transaction were disclosed or known to the members who voted upon such transaction and the transaction was authorized, approved, or ratified by a majority of the votes cast by disinterested members or by the written consent of disinterested members representing a majority of the votes that could be cast by all disinterested members. A membership interest owned by or voted under the control of a director who has a relationship or interest in the director’s conflict of interest transaction may not be considered a membership interest owned by a disinterested member and may not be counted in a vote of members to determine whether to authorize, approve, or ratify a director’s conflict of interest transaction under this subsection. The vote of those membership interests, however, is counted in determining whether the transaction is approved under other sections of this chapter. A majority of the membership interests, whether or not present, that are entitled to be counted in a vote on the transaction under this subsection constitutes a quorum for the purpose of taking action under this section.

(b) If neither of the conditions provided in paragraph (a) has been satisfied, the person defending or asserting the validity of a director’s conflict of interest transaction has the burden of proving its fairness in a proceeding challenging the validity of the transaction.

(4) The presence of or a vote cast by a director with an interest in the transaction does not affect the validity of an action taken under paragraph (3)(a) if the transaction is otherwise authorized, approved, or ratified as provided in subsection (3), but the presence or vote of the director may be counted for purposes of determining whether the transaction is approved under this chapter.

(5) In addition to other grounds for challenge, a party challenging the validity of the transaction is not precluded from asserting and proving that a particular director or member was not disinterested on grounds of financial or other interest for purposes of the vote on, consent to, or approval of the transaction.

(6) If directors’ action under this section does not otherwise satisfy a quorum or voting requirement applicable to the authorization of the transaction by directors as required by the articles of incorporation, the bylaws, this chapter, or any other law, an action to satisfy those authorization requirements, whether as part of the same action or by way of another action, must be taken by the board of directors or a committee in order to authorize the transaction. In such action, the vote or consent of directors who are not disinterested may be counted.

(7) If members’ action under this section does not satisfy a quorum or voting requirement applicable to the authorization of the transaction by members as required by the articles of incorporation, the bylaws, this chapter, or any other law, an action to satisfy those authorization requirements, whether as part of the same action or by way of another action, must be taken by the members in order to authorize the transaction. In such action, the vote or consent of members who are not disinterested members may be counted.