Thursday, August 21, 2008

Boards: Term Limits and Personal Liability

In my role as Nonprofit Resource Specialist, I have the opportunity to work with a number of nonprofit organizations and boards of directors. In my work with boards there are a couple questions that come up time and time again.

They are:
1) Term limits for board members
2) Personal liability for board members

First in regard to term limits – the organizations articles or bylaws should indicate board members terms. Many organizations however do not have term limits and board members end up serving year-after-year. According to Chapter 317A.207 of the Nonprofit Corporation Act a term of a director, other than an ex officio director, may not exceed 10 years AND if the articles or bylaws do not provide for a fixed term, the term is one year. An ex officio director serves as long as the director holds the office or position designated in the articles or bylaws.

In regard to personal liability for board members, again, according to Chapter 317A.257 of the Nonprofit Corporation Act a person who serves without compensation as a director, officer, trustee, member or agent of an organization exempt from state income taxation is not civilly liable for an act or omission by that person if the act or omission was in good faith, was within the scope of the person’s responsibilities as a director, trustee, member…..and did not constitute willful or reckless misconduct. Liability insurance and indemnification can also provide protection for individuals. This is typically purchased as director’s and officer’s insurance and paid for by the organization on behalf of its director’s.

For further exceptions and to read the statue for yourself on personal liability for board members/director’s and term limits go to and type Chapter 317A in on the left hand side. You can then reference the specific numbers from the paragraphs above. This is Minnesota specific, other states will need to check with their own Attorney General’s Office.

Holly Witt, NRS, Alexandria

No comments: