As a director of a nonprofit, can I be
held personally liable? From
I was recently asked to be on the board of directors of a nonprofit
organization. The business is in financial trouble, which appears to be
largely due to mismanagement by the current staff -- and the board at
present seems to be around solely to rubber-stamp the decisions of the
staff. If the board decides to maintain its current complacency and the
business continues to fail, may the board be legally responsible for the
debt of the nonprofit ?
Generally, a board will not be saddled with a failing nonprofit's debt.
But that's no reason to look the other way. A board member may be held
personally liable for unpaid taxes and penalties for failure to file returns
or see that payroll taxes are withheld and paid.
Also, if a board decision or lack of a decision is grossly negligent, board
members are sometimes held personally responsible.
The bottom line is that it is best to resign from a loosely run board unless
you are covered by an adequate D & O liability policy (directors and
officers liability policy).