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Fiduciary Duties & Other Legal Issues
Patricia May, CAP-OMPresident, DE-MD-DC Division
Owed to the organization by officers and directors Three primary duties
Fiduciary Duties
Faithful to the purpose and goals Unlike for profit corporations, nonprofits defined by their
objectives Representations made to governmental agencies
Fiduciary Duties
Duty of Obedience
Reasonably informed, Participate in decisions, and Do so in good faith and with the care of an ordinarily prudent
person in similar situations.
Fiduciary Duties
Duty of Care
Common law doctrine
Even when a decision has proven to be unwise or unsuccessful, a director will be protected from liability if
acted in good faith
in a manner reasonably believed to be in the best interest of the corporation
with independent and informed judgment.
Fiduciary Duties
Business Judgment Rule
a court will not second guess decisions that are: reasonable, informed and made in good faith
Fiduciary Duties
Business Judgment Rule
conflicts of interest, corporate opportunities and confidentiality
Fiduciary Duties
Duty of Loyalty
act in the best interests of IAAP
NOT in your interest or that of another organization
Fiduciary Duties
Conflict of Interest
NOT inherently bad follow proper procedure:
full disclosure recusal approval by disinterested directors
Fiduciary Duties
Conflict of Interest
prospect, idea or investment, related to activities of IAAP, knew, or should have known, of interest to IAAP
Fiduciary Duties
Corporate Opportunity
A director may take advantage of opportunity after: disclosure to IAAP rejection of opportunity
Fiduciary Duties
Corporate Opportunity
necessary for good governance presumption of confidential treatment Certain information should always be kept confidential, such as:
information received from legal counsel; pending or threatened litigation; personnel decisions; negotiations with a third party; executive session.
Fiduciary Duties
Confidentiality
Certain information should always be kept confidential, such as: information received from legal counsel; pending or threatened litigation; personnel decisions; negotiations with a third party; executive session.
Fiduciary Duties
Confidentiality
Corporate Governance - Authority Contracts
review process signing authority
Insurance: D&O vs. General Liability
Other Legal Issues