Legal Question in Business Law in California

Corporate conflict of interest

Is there any law which precludes a person from being appointed to and or accepting a Board of Directors position of a 501c3 corporation if there is an onging and open conflict of interest:ie-threats to bring suit against other board members if they do not make certain decisions in the interest of the person in question? I would like to know of any specific codes to review.


Asked on 1/13/99, 12:20 am

1 Answer from Attorneys
Jed Somit Jed Somit, Attorney at Law

Re: Corporate conflict of interest

Cal. Corporations Code Sections 7231 and 7233 are the basic

statutes. Also see sections 7235 and 7236. If the interested

transactions undercut the public benefit purpose of the

corporation, it is possible that the transactions could

threaten the 501(c)(3) standing.

There is some non-statutory ("common law") rules imposing a duty

of good faith on directors, but your facts are not specific enough to

evaluate. Directors generally can have some interests satisfied by

a corporation, even a non-profit.

I don't see how the threat of suits against the other directors would

be taken very seriously: what would he sue for? I don't think such a suit

would last long in court.

Jed Somit

Jed Somit, Attorney at Law

1440 Broadway - Suite 910


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Answered on 1/27/99, 1:01 pm


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