Posted:
Robin,
Posted below is the MI nonprofit corp statute dealing with conflict of interest. In the case of your board member, if the conflict was disclosed to the board b/4 they voted to let the contract and the board member in question did not vote or did not cast the determining vote, then a conflict does not exist. Having said that, personally I do not think it's wise for a board to enter into a contract with a board member, especially one to this magniture. IMO, this board member should decide whether he wants to be a contractor or a board member -- one or the other, but not both!
I believe the IRS is only concerned with conflict of interest situation that may exists in tax-exempt (501(c)) orgs. Unless your HOA is tax exempt under one of the 501(c) qualifications, that worry does not exist.
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Sec. 545. A contract or other transaction between a corporation and 1 or more of its directors or officers, or
Rendered Tuesday, September 29, 2009 Page 31 Michigan Compiled Laws Complete Through PA 98 of 2009
Ó Legislative Council, State of Michigan Courtesy of www.legislature.mi.gov
between a corporation and a domestic or foreign corporation, domestic or foreign business corporation, firm,
or association of any type or kind, in which 1 or more of its directors or officers are directors or officers, or
are otherwise interested, is not void or voidable solely because of such common directorship, officership, or
interest, or solely because such directors are present at the meeting of the board or committee thereof which
authorizes or approves the contract or transaction, or solely because their votes are counted for such purpose
if any of the following conditions is satisfied:
(a) The contract or other transaction is fair and reasonable to the corporation when it is authorized,
approved, or ratified.
(b) The material facts as to the director's or officer's relationship or interest and as to the contract or
transaction are disclosed or known to the board or committee, and the board or committee authorizes,
approves, or ratifies the contract or transaction by a vote sufficient for the purpose without counting the vote
of any common or interested director.
(c) The material facts as to the director's or officer's relationship or interest and as to the contract or
transaction are disclosed or known to the shareholders or members, and they authorize, approve or ratify the
contract or transaction.
History: 1982, Act 162, Eff.