Texas Attorney General Opinion: JC-338 Page: 4 of 5
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The Honorable Jim Solis - Page 4
contract or transaction is specifically approved in good faith and with
ordinary care by vote of the disinterested members; or
(3) the contract or transaction is fair to the corporation when
it is authorized, approved, or ratified by the board of directors ....
TEX. REV. CIV. STAT. ANN. art. 1396-2.30(A) (Vernon 1997). Interested directors may be counted
in determining the presence of a quorum at a meeting of the board of directors that authorizes the
contract or transaction. Id. art. 1396-2.30(B).
If the corporation has adopted bylaws limiting its power to enter into a transaction in which
a director is interested, the corporation must comply with its bylaws. See id. art. 1396-2.09
(authority to adopt bylaws). In the absence of such bylaws or if such bylaws are less strict, the
corporation must comply with the standards set out in the Texas Non-Profit Corporation Act.
A development corporation's exercise of powers is subject "at all times to the control of the
governing body of the unit under whose auspices the corporation was created." Id. art. 5190.6
23(a)(12) (Vernon Supp. 2000). The governing body is required to "approve all programs and
expenditures of the corporation and annually review any financial statements of the corporation."
Id. 21. The corporation may not issue bonds without the approval of the governing body. See id.
25. Thus, the governing body is in a position to review the corporation's decision to enter into a
transaction in which a board member is financially interested and to determine whether it complies
with the provisions ofthe Texas Non-Profit Corporation Act or with the corporation's bylaws, if they
impose a stricter rule for conflicts of interest.
In summary, we conclude that the Texas Non-Profit Corporation Act prohibits the board of
an economic development corporation from approving a loan to a director of the corporation. See
id. art. 1396-2.25 (Vernon 1997). The board is not prohibited from entering into a contract or other
transaction in which a member of the board is interested if it complies with the provisions of the
Texas Non-Profit Corporation Act governing transactions between corporations and directors, see
id. art. 1396-2.30, or, if the corporation's bylaws impose a stricter standard, with the latter standard.
In reaching this conclusion on the conflict of interest issue, we do not address other legal issues that
may be raised by the proposed transaction, nor do we express an opinion on the validity of the
transaction.(JC-0338)
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Texas. Attorney-General's Office. Texas Attorney General Opinion: JC-338, text, February 12, 2001; (https://texashistory.unt.edu/ark:/67531/metapth274647/m1/4/: accessed May 22, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.