In addition, this conflict of interest policy will be discussed this evening. Please review and comment on this as well:
Nellie Gail Ranch Homeowners Association
“Conflict of Interest” Policy
The purpose for this policy is to address concerns relating to perceived “conflicts of interest” and to explain how the Board of Directors of the Nellie Gail Ranch Homeowners Association (“Nellie Gail”), a non-profit mutual benefit corporation, intends to function in the face of perceived “conflicts of interest” or “interested transactions” involving its Directors.
To begin, it is important to understand that the phrase “conflict of interest” is not something established in the laws governing homeowner associations. Rather, the law governing associations merely recognizes that certain procedures must be followed where a Director has a direct financial interest in a matter being decided by the Association, as discussed below.
Next, it should be recognized that Homeowner Associations differ significantly from a typical “for profit” corporation. As a practical matter, any transaction involving the Association is also likely to involve the personal financial interests of directors because Board decisions typically have an impact on the finances of all Owners.
Pursuant to the California Corporations Code (§7233(a)), a contract or other transaction between a corporation and one of its directors, or between a corporation and any corporation, firm, or association in which one of its directors has a material financial interest, is neither void nor voidable if either:
a) The contract is approved by the board of directors, after the interested director discloses the material financial interest to the board and if the interested director abstains from the vote; or
b) The contract is ratified by the members.
An interested director, although they must abstain from the vote, may be counted in determining the presence of a quorum at a board or committee meeting that authorizes, approves, or ratifies a contract or transaction. (Cal. Corp. Code § 7234.)
Because of the nature of an association, such as Nellie Gail, Directors will be required to participate in decisions that bear upon their lifestyle and personal choices, as well as their vocations and personal experiences. In fact, Nellie Gail looks to its Directors’ for their expertise in making such decisions in the best interest of the Association. Simply put, it is unavoidable that any Director of a common interest development will be impacted personally, simply by owning a home in that development.
As such, in an attempt to minimize any perceived “conflicts of interest” regarding its decisions, the Nellie Gail Ranch Owners Association Board of Directors does hereby adopt the following policy regarding “interested directors”:
1. No Association Director shall make, participate in making, or in any way attempt to use his or her official position to influence an Association decision in which he or she knows or has reason to know that he or she has a direct financial interest which is distinguishable from the financial interest of the Members of the Association generally.
2. In those instances where a Director has a material financial interest in a matter presented to the Nellie Gail Board for approval, that Director shall:
a) disclose said material financial interest to the Board; and
b) abstain from a vote on the topic.
3. Nothing in this policy shall prevent a Director from participating in the approval of contract in which they do not have a personal financial interest, or prevent a Director from voluntarily abstaining on a vote for personal reasons.
 An “interested director” is involved in a transaction to which the corporation is a party and in which he/she/they has/have a material financial interest. (Cal. Corp. Code § 5233.)