AGO 1989-044.

• Case Date: April 10, 1989
• Court: Kansas

Kansas Attorney General Opinions 1989. AGO 1989-044. April 10, 1989ATTORNEY GENERAL OPINION NO. 89-44The Honorable Bob VancrumState Representative Twenty-Ninth District State Capitol Room 112-S Topeka, Kansas Re: Corporations--Directors and Officers--Financial Interest of Officer or Director in Corporate Transaction; Application to Certain Nonprofit Corporations Synopsis: Non-for-profit corporations which are private foundations are subject to the provisions of K.S.A. 17-6304 and the duty of loyalty/fairness when making loans or charitable contributions. Transactions between a not-for-profit corporation and one or more of its directors are allowed if the directors' interests are disclosed and the directors do not unfairly benefit to the detriment of the corporation. Cited herein: K.S.A. 17-6001; 17-6102; 17-6304; 79-4601. * * * Dear Representative Vancrum: You request our opinion regarding the applicability of K.S.A. 17-6304 and the common law duty of loyalty/fairness to Kansas not-for-profit corporations which are private foundations. Your belief that private foundations are not subject to these provisions is essentially based on two arguments: 1) These conflict of interest provisions appear to contemplate an arms-length transaction whereby the corporation receives some "benefit for the bargain" making their application to private foundations nonsensical because these foundations frequently loan or give away corporate assets for nothing in return pursuant to K.S.A. 17-6102(9) and (14); and 2) K.S.A. 79-4601, a provision which specifically addresses self-dealing of private foundations, is inconsistent with K.S.A. 17-6304 thereby rendering the latter inapplicable to private foundations pursuant to K.S.A. 17-6001(c). Briefly, the situation with which you are concerned involves a below market rate loan made by a private foundation to a partnership which has a limited partner a for-profit corporation with a board of directors common to the private foundation. K.S.A. 17-6304 provides in part:

"(a) No contract or transaction between a corporation and one or more of its directors or officers, or between a corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable

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