On 09/14/2010 03:21 PM, Bret Fausett wrote:
Board payment is a difficult issue.
Another factor to consider is that, under California law, volunteer Board members of non-profit corporations are generally immune to personal liability....
It's been a couple of years since I last looked, but the California law was somewhat tricky because of a Federal immunity statute that may have preempted the California immunity statue in some circumstances. When I was on the board I found some situations where neither immunity statutes nor insurance would have offered any protection. (I warned the board; but as usual I got the Cassandra treatment.) In particular there was a situation in which ICANN was paying a lot of $$ to a contractor that had no legal right to collect those $$ (and I'm talking about $$ numbers with lots of zeros.) What made it "interesting" was that the recipient of those $$ was a person who was not only a founder and corporate officer of ICANN but also a person with significant direct control over corporate acts. That raised a thing that our US internal revenue service (our national "tax man") calls "intermediate sanctions" - https://secure.wikimedia.org/wikipedia/en/wiki/Intermediate_sanctions The penalties under intermediate sanctions land on the recipient of the $$, on the corporation, *and* on the officer and directors of the corporation. And those penalties are designed to be draconian. But what makes it most interesting is that those penalties are defined as a tax - http://frwebgate.access.gpo.gov/cgi-bin/usc.cgi?ACTION=RETRIEVE&FILE=$$xa$$b... Now, I am not at all sure that the California statutes can immunize a director against the payment of a Federal *tax*. And I do wonder whether typical D&0 insurance will insure against the payment of a *tax*. In other words whether volunteer or not, whether covered by D&O insurance or not, there may be significant personal risks to serving as a director on the board of a non-profit corporation. These are some of the reasons why I always suggest to a potential director that they go to their own legal counsel for advice on these issues. --karl--