§ 308B.461 Director Conflicts Of Interest

Statute text

Extracted from the Revisor of Statutes; first captured here October 15, 2026. Formatting and whitespace are normalized. Extraction can contain errors; the linked official text controls.

Subdivision 1. Conflict and procedure when conflict arises.

(a) A contract or other transaction between a cooperative and one or more of its directors, or between a cooperative and a business entity in or of which one or more of its directors are governors, directors, managers, officers, or legal representatives or have a material financial interest, is not void or voidable because the director or directors or the other business entities are parties or because the director or directors are present at the meeting of the members or the board or a committee at which the contract or transaction is authorized, approved, or ratified, if:

(1) the contract or transaction was, and the person asserting the validity of the contract or transaction sustains the burden of establishing that the contract or transaction was, fair and reasonable as to the cooperative at the time it was authorized, approved, or ratified and:

(i) the material facts as to the contract or transaction and as to the director's or directors' interest are disclosed or known to the members; and

(ii) the material facts as to the contract or transaction and as to the director's or directors' interest are fully disclosed or known to the board or a committee, and the board or committee authorizes, approves, or ratifies the contract or transaction in good faith by a majority of the board or committee, but the interested director or directors are not counted in determining the presence of a quorum and must not vote; or

(2) the contract or transaction is a distribution, contract, or transaction that is made available to all members or patron members as part of the cooperative's business.

(b) If a committee is elected or appointed to authorize, ratify, or approve a contract or transaction under this section, the members of the committee must not have a conflict of interest and be charged with representing the best interests of the cooperative.

Subdivision 2. Material financial interest.

For purposes of this section:

(1) a resolution fixing the compensation of a director or fixing the compensation of another director as a director, officer, employee, or agent of the cooperative, is not void or voidable or considered to be a contract or other transaction between a cooperative and one or more of its directors for purposes of this section even though the director receiving the compensation fixed by the resolution is present and voting at the meeting of the board or a committee at which the resolution is authorized, approved, or ratified or even though other directors voting upon the resolution are also receiving compensation from the cooperative; and

(2) a director has a material financial interest in each organization in which the director or the spouse; parents; children and spouses of children; brothers and sisters and spouses of brothers and sisters; and the brothers and sisters of the spouse of the director or any combination of them have a material financial interest. For purposes of this section, a contract or other transaction between a cooperative and the spouse; parents; children and spouses of children; brothers and sisters and spouses of brothers and sisters; and the brothers and sisters of the spouse of a director or any combination of them, is considered to be a transaction between the cooperative and the director.

History: 2003 c 105 art 1 s 34

Notes & interpretation Not part of the law

Verified against sources: October 15, 2026Last edited: October 16, 2026

In plain language#

A transaction between the cooperative and a director, or a business in which a director holds an office or "a material financial interest," is not void or voidable merely because of the director's interest or presence at the meeting, if it satisfies one of two safe harbors. ^{P1, § 308B.461, subd. 1(a)}

Subdivision by subdivision#

Subd. 1(a)(1) – Fair-and-reasonable path. The transaction must have been fair and reasonable to the cooperative when authorized, approved or ratified, and "the person asserting the validity of the contract or transaction sustains the burden of establishing" that. In addition, the text lists two disclosure and approval items: (i) the material facts and the director's interest are disclosed or known to the members; and (ii) they are fully disclosed or known to the board or a committee, which authorizes, approves or ratifies the transaction in good faith by a majority, with the interested director(s) not counted for quorum and not voting.

Subd. 1(a)(2) – Available-to-all path. The transaction is "a distribution, contract, or transaction that is made available to all members or patron members as part of the cooperative's business."

Subd. 1(b) – Committee approval. If a committee approves, its members must not have a conflict of interest and are charged with representing the cooperative's best interests.

Subd. 2 – Material financial interest.

(1) A resolution fixing a director's compensation (or another director's compensation as a director, officer, employee or agent) is not treated as a conflicted transaction, even if the compensated director votes or other voting directors are also paid.
(2) A director has a material financial interest in each organization in which the director or the director's spouse, parents, children and their spouses, siblings and their spouses, or the spouse's siblings (or any combination) have a material financial interest. A contract with any of those family members is considered a transaction between the cooperative and the director.

How it works in practice#

Subd. 1(a)(1) is built around process: disclosure, an uninterested vote, and a fairness record. Minutes should show disclosure, recusal and the basis for finding the terms fair; see § 308B.245.
[INFERENCE] The "available to all members" path plausibly covers terms every member is offered, such as a uniform patronage distribution or standard member pricing. The statute does not define its outer limit.
Committee members count as directors for this section (§ 308B.451, subd. 6).
The conflict sits next to the standard of conduct in § 308B.455, which presumes assent unless the director is "prohibited by a conflict of interest from voting."
Local officials reviewing a cooperative application may use this section to frame a question about related-party dealings. See Model questions to ask a cooperative applicant.

Standard of conduct: § 308B.455 · Liability limits: § 308B.465
Director rules at a glance: Director and officer rules in Chapter 308B

Sources

P1 Minnesota Statutes, Chapter 308B (Cooperative Associations), Office of the Revisor of Statutes, State of Minnesota. revisor.mn.gov (primary; accessed October 15, 2026)

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