AL Bar Practice Questions - Alabama Bar Examination Exam

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An Alabama corporation's director causes the corporation to enter a contract with another company in which the director has a personal financial interest, without disclosure. A shareholder challenges the transaction. Under Alabama corporate-fiduciary principles, how is this conflicting-interest transaction analyzed?

It is automatically valid because directors have broad discretion It is a criminal offense in all cases It is voidable unless the director shows it was fair to the corporation or was approved by disinterested directors or shareholders after disclosure It is valid only if the director resigns

Correct Answer:

It is voidable unless the director shows it was fair to the corporation or was approved by disinterested directors or shareholders after disclosure

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