k. Dealings Between Corporations with Interlocking Directors

Dealings Between Corporations with Interlocking Directors

As a general rule, a contract between two or more corporations having interlocking directors shall not be invalidated on that ground alone, except in cases of fraud, and provided that the contract is fair and reasonable under the circumstances¹.

However, if the interest of the interlocking director in one corporation is substantial and the interest in the other corporation or corporations is merely nominal, the contract shall be subject to the provisions governing contracts of self-dealing directors insofar as the latter corporation or corporations are concerned¹. For the purposes of interlocking directors, a stockholding exceeding twenty percent (20%) of the outstanding capital stock is considered substantial¹.