Understanding Board Member Liability: What to Know Before You Join and Before You Resign
Serving on a nonprofit board? Know your obligations, protections, and why liability can follow you even after you resign.
Serving on a nonprofit board is a meaningful way to support a mission you care about, but it comes with board member liability. There are legal and financial responsibilities of serving on a board, and those obligations do not end the day you resign. If an issue occurred while you were on the board, you may still be held accountable for your actions or inaction during that time.
Understanding your obligations and protections will help you make informed decisions before joining a board, while serving, and when it’s time to step down.
Legal protections for board members
Board members are protected by Oklahoma statutes in Title 18, the Federal Volunteer Protection Act of 1997, and directors and officers (D&O) liability insurance. Many organizations also offer indemnification to cover certain claims.
However, these protections have limits. They do not apply if a board member breaches their fiduciary duties of care, loyalty, or obedience to the mission. Examples include failing to attend meetings, neglecting to review financial reports, co-mingling funds, or engaging in self-dealing. Such actions can result in personal liability even if insurance coverage is in place.
Due diligence before joining a board
Before accepting a board position, review the organization’s governing documents and insurance policies and confirm that payroll taxes are current. Ask to see recent budgets, bank statements with reconciliations, and any policies related to background checks, abuse prevention, HIPAA compliance, or transportation.
Taking these steps ensures you understand the organization’s operations and helps protect you from potential liability. If the organization refuses to share information or you see any red flags in the information provided, you may choose to decline the board position.
What to consider before resigning
If you become aware of a problem while serving on a board, the best course is often to help resolve it before stepping down. Document the questions asked, information requested, and how the board responded as you work to resolve the issue.
If you choose to resign, put your reasons in writing. Be specific about concerns, such as being denied access to financial records or disagreeing with questionable contracts. Avoid vague statements about leaving because you are “too busy,” which could suggest you were not fulfilling your responsibilities. If you’re resigning on good terms and have no issues with the organization, it’s still a good idea to submit a written resignation.
Do not simply stop attending meetings. Remain involved until your resignation is formally tendered and request that your resignation be recorded in the minutes.
Awareness benefits the board and the organization
Many people join boards without fully understanding the board member liability that come with the role. A well-informed board protects both the organization and its members. By understanding your responsibilities, asking the right questions, and following best practices when joining or leaving a board, you reduce your risk and strengthen the nonprofit you serve.
Make informed decisions with trusted counsel
At Nonprofit Solutions Law, we help board members and nonprofit leaders understand their responsibilities and reduce their risk to help them enjoy the rewards of serving others. Whether you are joining a board or preparing to leave one, our team can guide the organization through each step. Contact us to schedule a consultation.