Fiduciary Duties & Other Legal Issues

Patricia May, CAP-OMPresident, DE-MD-DC Division

Owed to the organization by officers and directors Three primary duties

Fiduciary Duties

Faithful to the purpose and goals Unlike for profit corporations, nonprofits defined by their

objectives Representations made to governmental agencies

Fiduciary Duties

Duty of Obedience

Reasonably informed, Participate in decisions, and Do so in good faith and with the care of an ordinarily prudent

person in similar situations.

Fiduciary Duties

Duty of Care

Common law doctrine

Even when a decision has proven to be unwise or unsuccessful, a director will be protected from liability if

acted in good faith

in a manner reasonably believed to be in the best interest of the corporation

with independent and informed judgment.

Fiduciary Duties

Business Judgment Rule

a court will not second guess decisions that are: reasonable, informed and made in good faith

Fiduciary Duties

Business Judgment Rule

conflicts of interest, corporate opportunities and confidentiality

Fiduciary Duties

Duty of Loyalty

act in the best interests of IAAP

NOT in your interest or that of another organization

Fiduciary Duties

Conflict of Interest

NOT inherently bad follow proper procedure:

full disclosure recusal approval by disinterested directors

Fiduciary Duties

Conflict of Interest

prospect, idea or investment, related to activities of IAAP, knew, or should have known, of interest to IAAP

Fiduciary Duties

Corporate Opportunity

A director may take advantage of opportunity after: disclosure to IAAP rejection of opportunity

Fiduciary Duties

Corporate Opportunity

necessary for good governance presumption of confidential treatment Certain information should always be kept confidential, such as:

information received from legal counsel; pending or threatened litigation; personnel decisions; negotiations with a third party; executive session.

Fiduciary Duties

Confidentiality

Certain information should always be kept confidential, such as: information received from legal counsel; pending or threatened litigation; personnel decisions; negotiations with a third party; executive session.

Fiduciary Duties

Confidentiality

Corporate Governance - Authority Contracts

review process signing authority

Insurance: D&O vs. General Liability

Other Legal Issues