Texas Business Organizations Code 101.255 – Contracts or Transactions Involving Interested Governing Persons or Officers
(a) This section applies to a contract or transaction between a limited liability company and:
(1) one or more governing persons or officers, or one or more affiliates or associates of one or more governing persons or officers, of the company; or
(2) an entity or other organization in which one or more governing persons or officers, or one or more affiliates or associates of one or more governing persons or officers, of the company:
(A) is a managerial official; or
(B) has a financial interest.
(b) An otherwise valid and enforceable contract or transaction described by Subsection (a) is valid and enforceable, and is not void or voidable, notwithstanding any relationship or interest described by Subsection (a), if any one of the following conditions is satisfied:
(1) the material facts as to the relationship or interest described by Subsection (a) and as to the contract or transaction are disclosed to or known by:
(A) the company’s governing authority or a committee of the governing authority and the governing authority or committee in good faith authorizes the contract or transaction by the approval of the majority of the disinterested governing persons or committee members, regardless of whether the disinterested governing persons or committee members constitute a quorum; or
(B) the members of the company, and the members in good faith approve the contract or transaction by vote of the members; or
(2) the contract or transaction is fair to the company when the contract or transaction is authorized, approved, or ratified by the governing authority, a committee of the governing authority, or the members of the company.
Terms Used In Texas Business Organizations Code 101.255
- Contract: A legal written agreement that becomes binding when signed.
- Entity: means a domestic entity or foreign entity. See Texas Business Organizations Code 1.002
- Governing authority: means a person or group of persons who are entitled to manage and direct the affairs of an entity under this code and the governing documents of the entity, except that if the governing documents of the entity or this code divide the authority to manage and direct the affairs of the entity among different persons or groups of persons according to different matters, "governing authority" means the person or group of persons entitled to manage and direct the affairs of the entity with respect to a matter under the governing documents of the entity or this code. See Texas Business Organizations Code 1.002
- Governing person: means a person serving as part of the governing authority of an entity. See Texas Business Organizations Code 1.002
- Limited liability company: means an entity governed as a limited liability company under Title 3 or 7. See Texas Business Organizations Code 1.002
- Managerial official: means an officer or a governing person. See Texas Business Organizations Code 1.002
- Member: means :
(A) in the case of a limited liability company, a person who has become, and has not ceased to be, a member in the limited liability company as provided by its governing documents or this code;
(B) in the case of a nonprofit corporation, a person who has membership rights in the nonprofit corporation under its governing documents;
(C) in the case of a cooperative association, a member of a nonshare or share association;
(D) in the case of a nonprofit association, a person who has membership rights in the nonprofit association under its governing documents; or
(E) in the case of a professional association, a person who has membership rights in the professional association under its governing documents. See Texas Business Organizations Code 1.002 - Organization: means a corporation, limited or general partnership, limited liability company, business trust, real estate investment trust, joint venture, joint stock company, cooperative, association, bank, insurance company, credit union, savings and loan association, or other organization, regardless of whether the organization is for-profit, nonprofit, domestic, or foreign. See Texas Business Organizations Code 1.002
- Person: means an individual or a corporation, partnership, limited liability company, business trust, trust, association, or other organization, estate, government or governmental subdivision or agency, or other legal entity, or a protected series or registered series of a domestic limited liability company or foreign entity. See Texas Business Organizations Code 1.002
- Quorum: The number of legislators that must be present to do business.
- written: means an expression of words, letters, characters, numbers, symbols, figures, or other textual information that is inscribed on a tangible medium or that is stored in an electronic or other medium that is retrievable in a perceivable form. See Texas Business Organizations Code 1.002
(c) Common or interested governing persons of a limited liability company may be included in determining the presence of a quorum at a meeting of the company’s governing authority or of a committee of the governing authority that authorizes the contract or transaction.
(d) A person who has the relationship or interest described by Subsection (a) may:
(1) be present at or participate in and, if the person is a governing person or committee member, may vote at a meeting of the governing authority or of a committee of the governing authority that authorizes the contract or transaction; or
(2) sign, in the person’s capacity as a governing person or committee member, a written consent of the governing persons or committee members to authorize the contract or transaction.
(e) If at least one of the conditions of Subsection (b) is satisfied, neither the company nor any of the company’s members will have a cause of action against any of the persons described by Subsection (a) for breach of duty with respect to the making, authorization, or performance of the contract or transaction because the person had the relationship or interest described by Subsection (a) or took any of the actions authorized by Subsection (d).