Also known as: affirmative disclosures · required disclosure
Written by attorneys · grounded in primary & secondary sources — see below
The proactive revelation by a director or officer of all material facts known to that person concerning a conflicting interest transaction or business opportunity. This disclosure must occur before qualified directors or shareholders act to authorize the transaction or disclaim the opportunity.
Director Arthur Abrams owns a controlling stake in a supplier that seeks to sell components to Ashford Manufacturing. Abrams tells the qualified directors on the board the full terms of the proposed contract and his ownership interest. The qualified directors then meet separately, deliberate without Abrams present, and approve the deal by the required majority vote.
Officer Alexandra Armstrong learns of a valuable lease opportunity that fits Astra Aerospace's expansion plans. Before pursuing it personally, Armstrong provides the board with complete details on the lease terms, location, and financial projections. The board takes no action after the disclosure, allowing Armstrong to proceed without corporate claim.
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The director must reveal all material facts about the transaction and the conflict that are not already known to the qualified directors. The qualified directors must then deliberate and vote separately without the conflicted director's participation.
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No. The director or officer must make prior disclosure of all material facts known to that person concerning the opportunity. A vague mention without cost projections or other details leaves the corporation unable to evaluate the matter properly.
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The director or officer may pursue the opportunity without liability, provided the disclosure was complete and occurred before any personal obligation arose. Shareholders may also disclaim the opportunity through compliant procedures after full disclosure.
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