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