Legal Question in Business Law in California

Corporations Code section 5227 contains, in subpart (b), a definition of an "interested person" for purposes of that section. The definition does not seem to cover the vendor-type relationships you describe. However, self-dealing transactions are covered by other laws, both statutory and judge-made, so you may be trying to apply the wrong law. Look, for example, at Corporations Code section 5233 prohibiting certain self-dealing transactions and defining an "interested director."

So, I suggest the concerned parties - both the director and anyone challenging the director's possibly-conflicting interests - review the law in greater depth. 5233 is a lengthy section, and may be where you should be reading, thinking and applying - but also look at the preceding and following sections.

If any doubt remains, consult an attorney with non-profit litigation experience.

As the previous attorney correctly pointed out, this is not an issue of an "interested director" breaching their duty to the non-profit. Rather it is the issue of self-dealing, namely the director is using their position in the non-profit to benefit themselves at the expense of the non-profit.

However, self-dealing transactions are permissible if authorized before the transaction takes place. Although if pre-approval is not obtained, a lawsuit may be initiated by the directors, officers, members, etc.

This is not an issue to take lightly because the penalties for self-dealing are severe, such as non-profit revocation by the IRS.