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The following article is on the role of volunteers as board members and officers of community non-profit organizations. Our law firm assists many area community groups with their entity formation, governance, and other legal concerns.
Volunteers are an integral part of our small communities. They help out at our churches, schools, and civic groups. Community organizations often ask volunteers for their time and labor. Volunteers work in the concession stand at a game, hang up event posters in town, or call out bingo numbers at a community event. Organizations also ask volunteers to take on more substantial responsibilities. Volunteers serve on the board of directors and they may serve as an officer of the organizations such as President, Secretary, or Treasurer. So, what does it mean to take on such a leadership role?
For non-profit corporations, the duties and responsibilities of board members and officers are addressed in Minn. Stat. 317A, the Minnesota Nonprofit Corporation Act. The Act requires that the business and affairs of a nonprofit corporation be managed by a board of directors and describes the standard of care required of a director. Minn. Stat. 317A.251 states “A director shall discharge the duties of the position of director in good faith, in a manner the director reasonably believes to be in the best interests of the corporation, and with the care an ordinarily prudent person in a like position would exercise under similar circumstances.” The Act imposes the same standard of care on the officers of a non-profit corporation.
If you serve on the board of a non-profit corporation as a director or in an officer position, you’ll want to understand how to fulfill this duty of care to the organization. This means that you should be an active participant in the organization and devote enough time to prepare for and attend meetings; review minutes and other corporate and financial information; and seek out information to make an informed decision. A board member’s decision on a matter should be in the best interest of the organization.
The Act also imposes a duty of loyalty on board members and officers. This means that a board member should put the organization’s interests above her/his own and disclose any actual or potential conflicts of interest. The Act also provides that transactions between a board member and the corporation are subject to higher scrutiny. If a nonprofit corporation enters into a contract with a board member, officer, or one of their family members, the contract must meet statutory requirements in order to be enforceable. Generally speaking, it must be established that the contract was fair and reasonable to the corporation when adopted; the director’s interest or family member’s interest was fully disclosed; and it was approved by two-thirds of members not including the interested director. Most nonprofit corporations will have a policy on how a board member may avoid a conflict of interest.
There is also a duty of obedience imposed on board members and officers which means that they have a duty to follow the organization’s mission and corporate governance documents. They must also comply with state and federal laws in their leadership role guiding and carrying out the business of the organization.
Volunteers who serve on the board of a non-profit or take on an officer position are protected from personal liability under the Minnesota Nonprofit Corporation Act so long as they act in good faith, within the scope of the responsibilities of their roles, and fulfill their fiduciary duties of reasonable care and loyalty. There are a few limited exceptions to this provision of the Act, but, generally, volunteers are protected. By understanding the duties and how to fulfill them, volunteer board members and officers should feel confident and proud of their work in a leadership role for a community non-profit.
Any requests for topic suggestions may be sent to rene@breenandperson.com. Although we cannot give you legal advice through the column, we can provide some general information that may be helpful for you to know. Our purpose is to educate and we hope that you can take something new away from this column each time you read it.