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posted on May 17, 2018
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You are a volunteer board member. You donate your time to the organization and you work hard. You may like to think that your legal liabilities are different from those of board members of for-profit organizations; however, you would be wrong.

Board members have a duty to represent the interests of their members while directing the organization and operating within the boundaries of the law. Not-for-profits and charities in Ontario are governed by a number of laws, both provincial and federal. Here is a good list; however, for proper legal advice, always consult a lawyer.

The duties and liabilities of board members include the following: [1]

  • Management of the organization. The board bears ultimate responsibility for the organization’s operations. This includes
    • hiring the Executive Director,
    • providing adequate authority for activities of the organization, such as by amending relevant bylaws and policies
    • setting long-range strategic objectives
  • Duty of care: this means that you have a legal obligation to make sure your actions and decisions do not cause harm to others. The standards for charities are higher than for not-for-profits. [1]
  • Corporate Authority – this is defined by the letters of incorporation, bylaws, and other governing documents. You must act within the boundaries set out by these documents.
  • Negligence – board members can be held personally liable if someone seeks damages because of mismanagement

In addition, board members bear fiduciary duties:

  • Duty of honesty: directors must be honest in all dealings, and avoid any conflicts of interest
  • Duty of loyalty: when acting on behalf of the organization, a director’s sole interest is to the organization (e.g. self-dealing is not allowed)
  • Duty of due diligence (duty to act in good faith): directors must get to know their obligations and act on them.

Here is a partial checklist of key items which will enhance the due diligence in your governance. [2]

Action

Complete

To do

Read the bylaws

 

 

Read the policy manual

 

 

Read the strategic plan and engage in planning activities

 

 

Read the business plan and budget

 

 

Read the communications and marketing plan

 

 

Read the most recent annual report

 

 

Read the organization chart

 

 

Read the organization’s history

 

 

Declare conflicts of interest

 

 

Avoid self-dealing in relation to the organization’s business

 

 

Request a business case for new product/service development and abandonment

 

 

Require contracts for significant arrangements

 

 

Seek legal advice on uncertain or risky matters

 

 

 

To learn more about being an effective board member, come to an upcoming seminar

Board 101: A First View

Click here to register Tuesday, June 5, 2018. 9:00 to 11:00 am

Click here to register Thursday, September 20, 2018. 6:30 to 8:30 p.m.

Board 201: A Complete Look at Being on a Board of Directors

Click here to register Thursday, November 8, 2018. 9:00 a.m. to 4:00 p.m.

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Related blog posts:

 

[1] Carters Professional Corporation, "Carters Charity Law Bulletin," 2015. [Online]. Available: http://www.charitylaw.ca/index.php?page_id=93. [2] J. B. Pealow and S. L. Humphrey, Best Practices and Tools for Not-for-Profit Boards, Canada: Canadian Society of Association Executives, 2013.
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