Non-Profits and Fiduciary Duties
Being on the board of directors (BOD) for a non-profit, comes with duties and obligations. This liability extends to you personally if you breach these responsibilities. Sometimes, people agree to be a director of a non-profit as a resume filler; or to support to a friend, family member, or colleague. Being a director of a non-profit however comes with risks and should be taken seriously. Directors need to be mindful of their fiduciary duties to avoid tax and personal liability.
What Is A Fiduciary?
Simply, a fiduciary is a person who holds a position of trust. Someone who has this trust has a fiduciary duty. For non-profits this duty contains three parts. They are; duty of obedience, duty of loyalty, and duty of care. Moreover, these duties can not be delegated. You can find experts to help to you, but ultimately you’re the one responsible if something goes wrong.
Duty of Obedience
The duty of obedience is unique to non-profits. It means the BOD will adhere to the mission statement written in the articles of incorporation as well as in the bylaws. Therefore, it’s important for you to read through the non-profit’s bylaws and articles of incorporation to make sure the BOD is adhering to the mission of the group.
Likewise, the other part of duty of obedience is keeping the tax exempt status of the organization. In other words, the board has to do, what it’s supposed to be doing. The BOD must stay focused to the non-profit’s mission and purpose, ensuring the IRS doesn’t take it’s exempt status away.
Duty of Loyalty
Duty of Loyalty simply means putting the organization’s business interests ahead of your own interests. Often, this duty is breached in one of two ways. Either through a conflict of interest, or using the non-profit for personal or corporate gain. Every non-profit organization should have a written conflict of interest policy and agreement signed by each board of director.
Duty of Care
To fulfill the obligation of duty of care a person must give care and concern as an ordinary prudent person would in similar circumstances. Also, a director must actively participate in the non-profit. Although many bylaws for non-profits allow directors to vote by proxy; don’t do it. You should attend meetings whether in it’s in person, by phone or Zoom. Also, don’t send your someone else even a fellow director vote for you. Not attending meetings especially if there’s an important vote, could demonstrate a breach of duty of care.
Be Active In Your Non-Profit
Accepting a directorship is a meaningful and endeavor. Before you do however, make sure you have the time to commit, as well as the motivation to be an active participating member of the group. Otherwise, you could be putting yourself and the organization in jeopardy. If you already are a director, have new or incoming directors understand their obligations as part of the on-boarding process. Review your articles of incorporation and the organization’s bylaws as well.
This article is for educational purposes only, and does not constitute legal advice about your case or situation. There may be exceptions to the information outlined above. Please consult an attorney if you have specific questions about your non-profit organization.Follow me on social media: