Whether a fortune 500 company, a not-for-profit housing association, charity, society, co-op, or strata council, the board of directors is the foundation of any organization’s governance. There is no legal or practical difference between a handsomely compensated director of a for-profit venture and a volunteer director for a local charitable organization. The same duties, standards, and obligations apply to any director of any corporate entity. So, when you volunteer for a board of directors, you run the risk of being personally liable if you and your fellow directors fail to meet the standard of care required of all boards of directors.
The Stevens Virgin 10-point checklist
The following 10-point standard of care checklist will give you an idea of how you and your board must conduct yourselves in order to avoid personal liability. As the director of an organization you should, at the very least:
- Know the organization’s primary objectives.
- Inform yourselves of issues in a timely manner.
- Devote sufficient time and attention to the consideration of all relevant information.
- Attend every board meeting, or if unable to attend, inform yourself of exactly what happened at the meeting.
- Make appropriate inquiries and conduct necessary investigations.
- Obtain appropriate expert and independent advice, and act on recommendations appropriately.
- Address all available alternatives and give them due consideration.
- Review documentation in a timely manner.
- Ensure that the proceedings and discussions are properly recorded.
- If a director disagrees with the decision of their board, they should ensure that their dissent is recorded in the minutes.
This checklist alone will not shield you from personal liability, but will point you and your fellow directors in the right direction. Stevens Virgin can provide you with a “legal liability checkup” by reviewing your board’s practices and processes to ensure you are meeting the standard of care, and avoiding liability.