1. (1) Board members shall make every reasonable effort to avoid contracts or other transactions for materials or services, as set forth in Subpart 1728-4 of this Title, which may involve a possible conflict of interest. Housing companies and board members are subject to the provisions of the Business Corporation Law or the Not-for-Profit Corporation Law regarding voting and disclosure where a contract or a proposed contract involves a possible conflict of interest on the part of a board member. In addition to the disclosure requirements set forth therein, prior disclosure must be made to the division and to the board by any board member who has a direct or indirect interest in a business which proposes to participate at any stage of a transaction which may lead to the providing of materials or services to the housing company.

2. (2) Upon such disclosure by a board member, the housing company, prior to the solicitation of bids, shall submit a plan to the division for approval which:

   1. (i) identifies the board member who has a direct or indirect interest, the name and address of the businesses involved, and the nature of the board member's interest;
   2. (ii) provides an appropriate mechanism to assure that bids will be solicited and evaluated fairly; and
   3. (iii) is designed to enable the housing company, in the event of an award to such a business, to adequately monitor the performance of the contract or transaction.

3. (3) If the housing company does not intend to solicit bids, it must establish to the division unique circumstances or emergency conditions render the use of a bidding procedure impracticable or inappropriate.

   (b) Other principals.

4. (1) Housing companies and certain other principals of the housing company are subject to the provisions of the Business Corporation Law or the Not-for-Profit Corporation Law applicable to officers of the corporation regarding voting and disclosure where a contract or proposed contract involves a possible conflict of interest on the part of such principal. In addition to the disclosure requirements set forth therein, there must be full disclosure to the division, the managing general partner and the board by any managing general partner, officer of the housing company or any shareholder, individual or entity with a 10 percent interest or more in a housing company, who has a direct or indirect interest in a business which proposes to participate at any stage of a transaction which may lead to the providing of materials or services to the housing company.

5. (2) Upon such disclosure by an individual or entity listed in paragraph (1) of this subdivision, the housing company, prior to the solicitation of bids, must submit a plan to the division which:

   1. (i) sets forth the individual or entity involved who has a direct or indirect interest and the nature of that interest;
   2. (ii) provides an appropriate mechanism to assure that all bids will be solicited and evaluated fairly; and
   3. (iii) is designed to enable the housing company, in the event of an award to such a business, to adequately monitor the performance of the contract or transaction.

6. (3) If the housing company does not intend to solicit bids, it must establish to the division that unique circumstances or emergency conditions render the use of a bidding procedure impracticable or inappropriate.

   (c) Mutual companies.

7. (1) No board member of a mutual company shall participate in a vote to approve, renew, or otherwise affect a contract where such board member, a family member of such board member, a person residing with such board member, or a family member of a person residing with such board member at the time of such vote is employed by or has a direct or indirect interest in or, in the two year period prior to such vote, was employed by or had a direct or indirect interest in:

   1. (i) such contractor; or
   2. (ii) a company which such contractor manages or in which such contractor had a direct or indirect interest at the time of such person's employment or interest. As used in this paragraph, family member means spouse, son, daughter, stepson, stepdaughter, father, mother, stepfather, stepmother, brother, sister, grandfather, grandmother, grandson, granddaughter, father-in-law, mother-in-law, son-in-law and daughter-in-law.
8. (2) At a meeting of a board or committee, board members who are prohibited from participation in a vote under paragraph (1) of this subdivision may nevertheless be counted in determining the presence of a quorum.

(a) Board members.