Legal Question in Business Law in Minnesota

Re: Closed bidding process for construction companies regarding non-profit organ

I would want to review the Non-profits by-laws in the context of state law to provide you an answer to both your questions.

The board would have to approve the process, without the interested Director voting regardless.

Re: Closed bidding process for construction companies regarding non-profit organ

Following up on David's answer, I am unaware of any law in MN requiring a non-profit to hard-bid capital improvement projects. You may want to look at your bylaws to see what they say.

With respect to the insider transaction, under certain circumstances, a contract or transaction between a nonprofit corporation and its director or an organization in which the director has a material financial interest is acceptable. However, if the transaction is challenged, the director will have the burden of establishing that the contract or transaction was fair and reasonable, that there was full disclosure of the conflict and that the contract or transaction was approved by members or other directors in good faith. That's a high burden to meet, and the board may want to consider having the transaction reviewed by an independent outsider to have a better certainty that the deal passes the smell test. Otherwise, maybe Mike Hatch will be knocking at the door!

There are a couple (at least) specific statutes dealing with this issue. Links to these statutes are below (you may need to cut & paste into your browser):

Standard of conduct http://www.revisor.leg.state.mn.us/stats/317A/251.html

Conflicts of interest http://www.revisor.leg.state.mn.us/stats/317A/255.html

In any event, good luck to you and if there is anything else I can do, please let me know. If you would like to discuss this further, please feel free to send me an e-mail. I do a fair amount of construction-related work.

Sincerely, Vince King

Standard disclaimer: The comments above are based on limited facts and should not be considered legal advice. We do not have an attorney-client relationship.