For the purposes of this part, the term:
(1) "Control", including the term "controlled by", means:
(A) Having the power, directly or indirectly, to elect or remove a majority of the members of the board of directors or other governing body of an entity, whether through the ownership of voting shares or interests, by contract, or otherwise; or
(B) Being subject to a majority of the risk of loss from the entity's activities or entitled to receive a majority of the entity's residual returns.
(2) "Director's conflicting interest transaction" means a transaction effected or proposed to be effected by the corporation, or by an entity controlled by the corporation:
(A) To which, at the relevant time, the director is a party;
(B) Respecting which, at the relevant time, the director had knowledge and a material financial interest known to the director; or
(C) Respecting which, at the relevant time, the director knew that a related person was a party or had a material financial interest.
(3) "Fair to the corporation" means, for the purposes of § 29-306.71(b)(3), that the transaction as a whole was beneficial to the corporation, taking into appropriate account whether it was:
(A) Fair in terms of the director's dealings with the corporation; and
(B) Comparable to what might have been obtainable in an arm's length transaction, given the consideration paid or received by the corporation.
(4) "Material financial interest" means a financial interest in a transaction that would reasonably be expected to impair the objectivity of the director's judgment when participating in action on the authorization of the transaction.
(5) "Related person" means:
(A) The director's spouse;
(B) A child, stepchild, grandchild, parent, step parent, grandparent, sibling, step sibling, half sibling, aunt, uncle, niece or nephew, or spouse of any thereof, of the director or of the director's spouse;
(C) An individual living in the same home as the director;
(D) An entity, other than the corporation or an entity controlled by the corporation, controlled by the director or any person specified above in this paragraph;
(E) A domestic or foreign:
(i) Business or nonprofit corporation, other than the corporation or an entity controlled by the corporation, of which the director is a governor;
(ii) Unincorporated entity of which the director is a governor or a member of the governing body; or
(iii) Individual, trust, or estate for whom or of which the director is a trustee, guardian, personal representative, or like fiduciary; or
(F) A person that is, or an entity that is controlled by, an employer of the director.
(6) "Relevant time" means:
(A) The time at which directors' action respecting the transaction is taken in compliance with § 29-306.72; or
(B) If the transaction is not brought before the board of directors of the corporation, or its committee, for action under § 29-306.72, at the time the corporation, or an entity controlled by the corporation, becomes legally obligated to consummate the transaction.
(7) "Required disclosure" means disclosure of:
(A) The existence and nature of the director's conflicting interest; and
(B) All facts known to the director respecting the subject matter of the transaction that a director free of such conflicting interest would reasonably believe to be material in deciding whether to proceed with the transaction.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For history of Law 18-378, see notes under § 29-101.01.
(a) A transaction effected or proposed to be effected by the corporation, or by an entity controlled by the corporation, shall not be the subject of equitable relief, or give rise to an award of damages or other sanctions against a director of the corporation, in a proceeding by a shareholder or by or in the right of the corporation, on the ground that the director has an interest respecting the transaction, if it is not a director's conflicting interest transaction.
(b) A director's conflicting interest transaction shall not be the subject of equitable relief, or give rise to an award of damages or other sanctions against a director of the corporation, in a proceeding by a shareholder or by or in the right of the corporation, on the ground that the director has an interest respecting the transaction, if:
(1) Directors' action respecting the transaction was taken in compliance with § 29-306.72 at any time;
(2) Shareholders' action respecting the transaction was taken in compliance with § 29-306.73 at any time; or
(3) The transaction, judged according to the circumstances at the relevant time, is established to have been fair to the corporation.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For history of Law 18-378, see notes under § 29-101.01.
(a) Except as otherwise provided in subsection (b) of this section, directors' action respecting a director's conflicting interest transaction shall be effective for the purposes of § 29-306.71(b)(1) if the transaction has been authorized by the affirmative vote of a majority, but no fewer than 2, of the qualified directors who voted on the transaction, after required disclosure by the conflicted director of information not already known by such qualified directors, or after modified disclosure in compliance with subsection (b) of this section; provided, that:
(1) The qualified directors have deliberated and voted outside the presence of and without the participation by any other director; and
(2)(A) If the action has been taken by a committee, all members of the committee were qualified directors; and
(B)(i) The committee was composed of all the qualified directors on the board of directors; or
(ii) The members of the committee were appointed by the affirmative vote of a majority of the qualified directors on the board.
(b) Notwithstanding subsection (a) of this section, when a transaction is a director's conflicting interest transaction only because a related person described in § 29-306.70(5)(E) or (F) is a party to or has a material financial interest in the transaction, the conflicted director shall not be obligated to make required disclosure to the extent that the director reasonably believes that doing so would violate a duty imposed under law, a legally enforceable obligation of confidentiality, or a professional ethics rule; provided, that the conflicted director discloses to the qualified directors voting on the transaction:
(1) All information required to be disclosed that is not so violative;
(2) The existence and nature of the director's conflicting interest; and
(3) The nature of the conflicted director's duty not to disclose the confidential information.
(c) A majority, but no fewer than 2, of all the qualified directors on the board of directors, or on the committee, constitutes a quorum for the purposes of action that complies with this section.
(d) If directors' action under this section does not satisfy a quorum or voting requirement applicable to the authorization of the transaction by reason of the articles of incorporation, the bylaws, or a provision of law, independent action to satisfy those authorization requirements shall be taken by the board of directors or a committee, in which action directors who are not qualified directors may participate.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For history of Law 18-378, see notes under § 29-101.01.
(a) Shareholders' action respecting a director's conflicting interest transaction shall be effective for the purposes of § 29-306.71(b)(2) if a majority of the votes cast by the holders of all qualified shares are in favor of the transaction after:
(1) Notice to shareholders describing the action to be taken respecting the transaction;
(2) Provision to the corporation of the information referred to in subsection (b) of this section; and
(3) Communication to the shareholders entitled to vote on the transaction of the information that is the subject of required disclosure, to the extent the information is not known by them.
(b) A director who has a conflicting interest respecting the transaction shall, before the shareholders' vote, inform the secretary or other officer or agent of the corporation authorized to tabulate votes, in writing, of the number of shares that the director knows are not qualified shares under subsection (c) of this section, and the identity of the holders of those shares.
(c) For the purposes of this section, the term:
(1) "Holder" means, and "held by" refers to, shares held by both a record shareholder and a beneficial shareholder.
(2) "Qualified shares" means all shares entitled to be voted with respect to the transaction except for shares that the secretary or other officer or agent of the corporation authorized to tabulate votes either knows, or under subsection (b) of this section is notified, are held by:
(A) A director who has a conflicting interest respecting the transaction; or
(B) A related person of the director, excluding a person described in § 29- 306.70(5)(F).
(d) A majority of the votes entitled to be cast by the holders of all qualified shares shall constitute a quorum for purposes of compliance with this section. Subject to subsection (e) of this section, shareholders' action that otherwise complies with this section shall not be affected by the presence of holders, or by the voting, of shares that are not qualified shares.
(e) If a shareholders' vote does not comply with subsection (a) of this section solely because of a director's failure to comply with subsection (b) of this section, and if the director establishes that the failure was not intended to influence and did not in fact determine the outcome of the vote, the Superior Court may take such action respecting the transaction and the director, and may give such effect, if any, to the shareholders' vote, as the court considers appropriate in the circumstances.
(f) If shareholders' action under this section does not satisfy a quorum or voting requirement applicable to the authorization of the transaction by reason of the articles of incorporation, the bylaws, or a provision of law, independent action to satisfy those authorization requirements shall be taken by the shareholders, in which action shares that are not qualified shares may participate.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For history of Law 18-378, see notes under § 29-101.01.
