Texas Codes

Tex. Bus. Orgs. Code § 21.418 (2026)

Contracts Or Transactions Involving Interested Directors And Officers

✓ current as of May 2026

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Sec. 21.418. CONTRACTS OR TRANSACTIONS INVOLVING INTERESTED DIRECTORS AND OFFICERS. (a) This section applies to a contract or transaction between a corporation and:

(1) one or more directors or officers, or one or more affiliates or associates of one or more directors or officers, of the corporation; or

(2) an entity or other organization in which one or more directors or officers, or one or more affiliates or associates of one or more directors or officers, of the corporation:

(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 corporation's board of directors or a committee of the board of directors, and the board of directors or committee in good faith authorizes the contract or transaction by the approval of the majority of the disinterested directors or committee members, regardless of whether the disinterested directors or committee members constitute a quorum; or

(B) the shareholders entitled to vote on the authorization of the contract or transaction, and the contract or transaction is specifically approved in good faith by a vote of the shareholders; or

(2) the contract or transaction is fair to the corporation when the contract or transaction is authorized, approved, or ratified by the board of directors, a committee of the board of directors, or the shareholders.

(c) Common or interested directors of a corporation may be included in determining the presence of a quorum at a meeting of the corporation's board of directors, or a committee of the board of directors, 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 director or committee member, may vote at a meeting of the board of directors or of a committee of the board that authorizes the contract or transaction; or

(2) sign, in the person's capacity as a director or committee member, a unanimous written consent of the directors or committee members to authorize the contract or transaction.

(e) If at least one of the conditions of Subsection (b) is satisfied, neither the corporation nor any of the corporation's shareholders 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).

(f) This subsection applies only to a corporation that has a class or series of voting shares listed on a national securities exchange or has made an affirmative election to be governed by Section 21.419. Regardless of whether the conditions of Subsection (b) are satisfied, neither the corporation nor any of the corporation's shareholders will have a cause of action against any director or officer for breach of duty with respect to the making, authorization, or performance of the contract or transaction because the director or officer had the relationship or interest described by Subsection (a) or took any of the actions authorized by Subsection (d) unless the cause of action is permitted by Section 21.419.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Amended by:

Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 37, eff. September 1, 2009.

Acts 2011, 82nd Leg., R.S., Ch. 139 (S.B. 748), Sec. 28, eff. September 1, 2011.

Acts 2025, 89th Leg., R.S., Ch. 21 (S.B. 29), Sec. 10, eff. May 14, 2025.

Notes of Decisions

Cited in 9 cases (3 in the last 5 years), 2011–2025 · leading case: Mandel v. Thrasher (In Re Mandel), 578 F. App'x 376 (5th Cir. 2014).

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Mandel v. Thrasher (In Re Mandel), 578 F. App'x 376 (5th Cir. 2014). “1980); see also Tex. Bus. Orgs.Code Ann. § 21.418 ("Contracts or Transactions Involving Interested Directors and Officers”).”

in the Matter of the Est. of Richard C. Poe (Tex. 2022). · cites it 4× “TEX. BUS. ORGS. CODE § 21.418(b). Section 21.”

Don Corley, Jr. v. Gaylan Hendricks & Dan Hendricks (Tex. App. 2017). · cites it 3× “Interested directors and shareholders cannot give effective consent to breaching their fiduciary duty to the company by stealing from the company at the expense of other directors and shareholders.”

in the Matter of the Est. of Richard C. Poe (Tex. App. 2019). · cites it 2× “Declaratory relief to set aside the stock issuance as a self-dealing transaction that is not exempted by TEX.BUS.ORG.CODE ANN. § 21.418; 15 2. That Dick breached his fiduciary duty to Richard; a duty established by a ‘confidential relationship’ that existed between the two; 3.”

Sister Initiative, LLC David Bagwell & Susan Bagwell v. Broughton Maint. Ass'n, Inc. Old Grove Maint. Ass'n, Inc. & Whittier Heights Maint. Ass'n, Inc. (Tex. App. 2020). “” (citing Tex. Bus. Orgs. Code Ann. § 21.418 (b))).”

Edward Roels, Bruce Barshop, Julie Mak, & Jim Pabst// Lee Valkenaar, Jack Long, Roxann Chargois, Jarred Maxwell & Aqushen, LLC v. Lee Valkenaar, Jarred Maxwell, Roxann Chargois, Jack Long, & Aqushen, LLC// Edward Roels, Bruce Barshop, Julie Mak, & Jim Pabst (Tex. App. 2020). “See Tex. Bus. Orgs. Code § 21.418(c) (providing that if interested-director transaction has either been approved by Board after material facts are disclosed or is fair to corporation, shareholders will have “no cause of action” against director for breach of duty with respect to…”

Richard C. Poe, II v. Paul O. Sergent, Jr., Individually, as an Officer of Poe Mgmt., Inc., & as a Co-Tr. of the Dick Poe Est. Trust; Anthony E. Bock, Individually, as an Officer of Poe Mgmt., Inc., as Co-Indep. of the Est. of Richard C. Poe, & as Co-Tr. of Dick Poe Est. Trust; Karen G. Castro, Individually, as an Officer of Poe Mgmt., Inc.,as Co-Indep. of the Est. of Richard C. Poe, & as Co-Tr. of Dick Poe Est. Trust (Tex. App. 2025). “Tex. Bus. Org. Code Ann. § 21.418 (b). The second phase of trial concerned Richard’s claims against Sergent, Bock, and Castro in their individual capacities.”

Hubert \Bud\" Kott v. Brian T. Miller & MK Developers L.C." (Tex. App. 2025). “3d at 290 (citing Tex. Bus. Orgs. Code § 21.418). To successfully challenge the legal and factual sufficiency of the evidence on an issue on which he had the burden of proof, Kott must show either that the evidence conclusively established the opposite of the trial court’s…”

Game Sys., Inc. A/K/A Texas Game Sys. v. Forbes Hutton Leasing, Inc. & Gametronics Gaming Equip. Ltd. & Robert Houchin (Tex. App. 2011). “2d 715, 717 (1961) (noting that ―it is also well settled that officers and directors of a corporation are not disqualified from dealing with the corporation‖); see also Tex. Bus. Orgs. Code Ann. § 21.418 (West 2010) (providing circumstances under which a transaction by an…”

— Tex. Bus. Orgs. Code § 21.418(b) — 1 case

in the Matter of the Est. of Richard C. Poe (Tex. 2022). “TEX. BUS. ORGS. CODE § 21.418(b). Section 21.”

— Tex. Bus. Orgs. Code § 21.418(b)(1) — 1 case

in the Matter of the Est. of Richard C. Poe (Tex. 2022). “TEX. BUS. ORGS. CODE § 21.418(b). Section 21.”

— Tex. Bus. Orgs. Code § 21.418(b)(2) — 1 case

in the Matter of the Est. of Richard C. Poe (Tex. 2022). “TEX. BUS. ORGS. CODE § 21.418(b). Section 21.”

— Tex. Bus. Orgs. Code § 21.418(c) — 1 case

— Tex. Bus. Orgs. Code § 21.418(e) — 1 case

in the Matter of the Est. of Richard C. Poe (Tex. 2022). “TEX. BUS. ORGS. CODE § 21.418(b). Section 21.”

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