As a majority shareholder or board member, you want to protect yourself and your company. However, the line between your personal interest and your duties can sometimes feel unclear. Self-dealing is one of the areas that causes the most concern in Texas.
Understanding what it looks like and how the law views it can give you perspective.
How Texas defines and treats self-dealing
Self-dealing happens when someone in a trusted role benefits personally at the company’s expense. In this case, the law focuses on conflicts of interest.
Not every conflict leads to liability, but transparency is important. If a transaction involves you personally, you must disclose it. Texas law provides specific safe harbor procedures to show what adequate disclosure is. This also requires approval from other board members or disinterested shareholders.
Even with full disclosure, you must make sure that a transaction is fair to the corporation. Otherwise, you may face liability. In self-dealing cases, you will likely need to show that the transaction was fair to the company.
Signs your actions could be considered self-dealing
Some situations tend to raise red flags under Texas law. Common examples include:
- Approving a contract between the company and a business you or a family member owns
- Taking an relevant opportunity for yourself in your corporate role instead of offering it to the company
- Using company funds or assets for personal gain without disclosure
- Receiving undisclosed kickbacks or extra compensation related to company deals
These situations do not automatically create liability. This makes context important. Transparency and following proper corporate processes make a significant difference.
Protect yourself while fulfilling your duties
You can navigate these risks without affecting your role. Keeping clear records and sharing conflicts openly with other board members or shareholders shows good judgment. Corporate counsel may also provide guidance for any major deal involving a conflict of interest.
Understanding self-dealing also helps you spot situations that might look risky to others. Acting with transparency shows that you are protecting both the company and yourself.
Corporate leadership is not always simple. However, you can participate fully while managing potential liability. Following proper procedures does not remove all risk, but it strengthens your position.