Duties &
Responsibilities
of Nonprofit
Board Members
• SIDEBAR with the Judge
•
by Judge Richard W. Carter, Retired CSUSA Director of Legal Services
• “Anonymity” Is Beyond “Important”
• From the CSUSA web inquiries: “Is it a national policy to ask a
tipster if they wish to remain anonymous before taking the tip? And if
the tipster does not require anonymity, do we not take his tip and
inform the tipster to call the police?
• My response: “Crime Stoppers in an ANONYMOUS tip program.
Tipsters should NOT be asked whether they wish to remain
anonymous. It should be assumed that they do. To ask every tipster if
they want to remain anonymous gives Crime Stoppers the appearance
of being deceptive and running a bait and switch scheme.”
• BUSINESS ORGANIZATIONS CODE
• CHAPTER 22. NONPROFIT
CORPORATIONS
GENERAL STANDARDS FOR DIRECTORS
& OFFICERS.
• A director-officer is not liable to the corporation, a
member, or another person for an action taken or not
taken as a director if the director acted in,
• in good faith;
• with ordinary care; and
• in a manner the director reasonably
believed to be in the best interest of the
corporation.
• This section shall not affect the liability of the
corporation for an act or omission of the officer.
• To meet this requirement, directors must
follow certain legal responsibilities also
known as:
• The Duty of Obedience
• The Duty of Care
• The Duty of Loyalty
• The Duty of Obedience
• Act in a manner that is consistent with:
•
•
•
•
•
•
Certificate of Formation
Articles of Incorporation
Mission
Bylaws
Tax exempt status
Federal, state, & local laws as they apply
• The Duty of Obedience
• If an action is not allowed by:
•
•
•
•
•
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Certificate of Formation
Articles of Incorporation
Mission
Bylaws
Tax exempt status
Federal, state, & local laws
• It should not be undertaken, even if it has
good intentions. In most cases it is not
worth the adverse results.
• The Duty of Obedience
• Crime Stoppers organizations need to
follow “best practices”.
• Shouldn’t a Crime Stopper program be
“squeakily clean”?
• If it is not allowed, don’t do it.
• Don’t break the law
Duty of
Obedience
•
The Duty of Care
• Perform duties with “ordinary care”, which is
good judgement and common sense.
• Devote reasonable time & attention to
duties
• Attend meetings
• Review & understand material given
• Ask questions, if necessary.
• Ordinary care may differ from director to director
based on their background, experience, and the
role they play in the organization.
• The Duty of Care
• A director acts in the best interest of the
nonprofit if the director reasonably believes
that the action will benefit the nonprofit.
• The director should have a proper motive
based on sufficient information.
• The Duty of Loyalty
• Law requires that the best interest of the nonprofit
prevail over the director’s personal or business
interests.
• Conflicts of Interest
• Business
• Financial
• Decisions should not benefit:
• You
• Your family
• Your business interest
At the expense of the nonprofit
• Conflicts of Interest
• Contracts & Transactions between director &
nonprofit are prohibited by law unless:
• Facts are disclosed to board
• Specifically approved by board in good faith
& ordinary care by a vote of disinterested
directors
• Vote can be less than a quorum
• Transaction with director should be carefully
documented in the minutes
• Liability
• Directors may not allow the distribution of assets
if a nonprofit is insolvent or the distribution
would make it insolvent, unless the nonprofit is
paying a debt.
• If directors violate this rule, they can be
personally responsible for the value of the unpaid
debts of the nonprofit.
• A director is presumed to have assented to the
distribution unless their dissent is appropriately
entered into the minutes of the meeting
• Directors may be protected if they acted in good faith
and relied on the written opinion of an attorney for
the nonprofit
• Taxes