A.R.S. § 10-3861 — Judicial action

Judicial action

Planned Communities & Condominiums · Text verified 2026-07-25

In plain English: This section explains when a transaction can be challenged in court because a director had an interest in it. A transaction that is not a director's conflicting interest transaction cannot be blocked, undone, or penalized just because a director or an associated person had an interest in it. Even a director's conflicting interest transaction cannot be blocked or penalized if it was properly approved by qualified directors under section 10-3862 or by members under section 10-3863, or if it is shown to have been fair to the association. Anyone seeking to attack such a transaction must first prove by clear and convincing evidence that none of those protections apply.

10-3861. Judicial action

A. A transaction that is effected or proposed to be effected by a corporation, or by a subsidiary of the corporation or any other entity in which the corporation has a controlling interest, and that is not a director's conflicting interest transaction shall not be enjoined, be set aside or give rise to an award of damages or other sanctions in a proceeding by a member or by or in the right of the corporation, because a director of the corporation, or any person with whom or with which the director has a personal, economic or other association, has an interest in the transaction.

B. A director's conflicting interest transaction shall not be enjoined, be set aside or give rise to an award of damages or other sanctions in a proceeding by a member by or in the right of the corporation, because the director, or any person with whom or with which the director has a personal, economic or other association, has an interest in the transaction, if either:

1. Directors' action respecting the transaction was taken at any time in compliance with section 10-3862.

2. Members' action respecting the transaction was taken at any time in compliance with section 10-3863.

3. The transaction, judged according to the circumstances at the time of commitment, is established to have been fair to the corporation.

C. Any person seeking to have a director's conflicting interest transaction enjoined, set aside or give rise to an award of damages or other sanctions shall first prove by clear and convincing evidence that subsection B of this section is not applicable.

Source: A.R.S. § 10-3861 — Arizona State Legislature