Legal Duties a New Non-Profit Board Director Needs to Know About

Were you recently elected to serve on a non-profit board as a director? Congratulations and welcome aboard!  As a new director stepping into the realm of non-profit governance laws, it’s crucial to understand fiduciary duties of non-profit board members, which guide your role. Serving on a board is rewarding because it allows you to use your skills to service your community, build new skills, expand your network, and of course contribute to charitable work. As a new director, you are entrusted with three core legal duties: Duty of Care, Duty of Loyalty, and Duty of Obedience.

Duty of Care

Your Duty of Care requires you to act with the same level of care that a reasonably prudent person would exercise in a similar position.  This means, that when making decisions and acting on behalf of your organization, you must think about what a sensible, responsible, and careful person would do in the same situation. You must gather all the information you can to make decisions, be engaged, ask questions, seek clarification, and actively participate in board meetings. You should rely upon experts when necessary. This includes listening to your corporate and board committees, corporate officers, attorneys, and accountants. Regularly review your governing documents, financial statements, and understand your organization’s programs and services. Carrying out your corporate duties with thoroughness, diligence, and care all will help you ensure your fulfilling your duty of care.

Duty of Loyalty

The Duty of Loyalty mandates that you prioritize your organization’s interests over personal or third-party interests. A pivotal part of fulfilling your duty of loyalty is declaring conflicts of interests to your board and not participating in votes that include a conflict of interest. For example, you cannot beef up your own salary or provide yourself with organizational perks that conflict with the best interests of your corporation. These actions are considered “self-dealing,” and courts frown heavily on such behavior. Conflicts of interest can also include using private or confidential corporate information for your own benefit, hiring a relative to fulfill a job they are not qualified for, or starting a competing non-profit. As you go about your board duties, transparency and integrity will be important aspects of fulfilling your duty of loyalty.

Duty of Obedience

This duty may sound strange but really it just means as a director you maintain a fidelity to your corporate purpose and mission. You must help ensure your organization is only participating in programs and services that are within the scope of its mission and purpose and that your organization is in compliance with the law and regulations.

The Duty of Obedience can also mean you are not acting outside your powers as a director.

Curry Law advises directors to have a comprehensive understanding of the organization’s governing documents to ensure you and your organization are acting within your organization’s charitable objectives.

Serving as a director in a non-profit organization is a privilege that comes with significant responsibilities. Embracing these duties—Care, Loyalty, and Obedience—is crucial to your organization’s success.

At Curry Law, we are committed to supporting non-profit directors like you in fulfilling these duties effectively. If you have any legal inquiries or need guidance in navigating the complexities of non-profit governance, we can assist you!

These materials are provided for informational purposes only. They do not constitute legal or tax advice and do not create an attorney-client relationship with you.