Notes:

• Identification and Disclosure: Directors must proactively disclose any actual or potential conflicts of interest (financial, personal, professional) immediately upon identification. This includes relationships with suppliers, competitors, or other board roles.
• Management Mechanisms:
  • Recusal: The conflicted director must recuse themselves from the discussion and vote on the specific matter.
  • Independent Committee Review: For significant related-party transactions (RPTs), an independent committee (often the Audit Committee) must review and approve the deal to ensure it is fair to the company.
  • Shareholder Approval: In some jurisdictions or for major RPTs, full shareholder approval is required.
• Related Party Transactions (RPTs): Strict rules (e.g., NYSE Rule 303A.04, SOX) govern RPTs. The board must ensure terms are no less favorable than those available from an unaffiliated third party.
• Legal Consequences: Failure to disclose or manage conflicts can lead to a breach of the Duty of Loyalty, resulting in personal liability, rescission of the transaction, and reputational ruin. Delaware courts apply “entire fairness” review to conflicted transactions if not properly ratified.