Under what conditions can a director receive an unfair benefit?

A director can receive an unfair benefit when there is a failure to adequately disclose material facts regarding a transaction and independent ratification by disinterested parties does not occur. This helps maintain the integrity of decision-making within the corporation and ensures that directors do not exploit their position for personal gain without proper oversight.

When a director is in a position to benefit from a transaction, they must disclose all relevant information that may influence the decision of shareholders or the board. Independent ratification means that disinterested shareholders or board members have reviewed the transaction and agreed to it without any conflicts of interest. This process acts as a safeguard, promoting fair dealings and reducing the potential for self-dealing or other forms of misconduct.

In contrast, scenarios like shareholder voting, board approval, or general consent do not necessarily provide the robust protections against conflicts of interest that full material disclosure and independent ratification do. Shareholder votes may still be swayed by directors' interests if conflicts are not disclosed, and board approval might involve directors who are not fully independent. Therefore, without the checks and balances provided by proper disclosure and independent review, there remains a risk of unfair benefits to directors.