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0 tracked cards Business Associations

A director owns 40% of a vendor that is seeking a long-term supply contract with the corporation. The director participates in the board discussion and votes for the contract.
Which statement best describes how the transaction may be upheld against a duty-of-loyalty challenge?

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The business judgment rule always applies to conflicted-director transactions exactly as it applies to ordinary business decisions. The transaction may be protected if the material facts of the conflict were disclosed and approved by disinterested directors or shareholders, or if the transaction was fair to the corporation. The contract is automatically void because a director had any financial interest in the supplier. The interested director's vote alone cleanses the conflict if the director honestly believed the price was fair.

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