When Can Individual Association Board Members Be Held Personally Liable For Actions of the Collective Board? Part 5
This blog is the fifth and final installment in a series of posts discussing an individual’s potential liability for the collective decisions made by their board. Be sure to read our previous posts online here.
A Board that acts in reliance upon advice of its experts and legal professionals cannot be held liable for negligence or breach of fiduciary duty if that advice turns out to be wrong. A provision of the New Jersey Nonprofit Corporation Act specifically provides, in relevant part:
Trustees and members of any committee designated by the board shall discharge their duties in good faith and with that degree of diligence, care and skill which ordinary, prudent persons would exercise under similar circumstances in like positions. In discharging their duties, trustees and members of any committee designated by the board shall not be liable if, acting in good faith, they rely on the opinion of counsel for the corporation or upon written reports setting forth financial data concerning the corporation and prepared by an independent public accountant or certified public accountant or firm of accountants or upon financial statements, books of account or reports of the corporation represented to them to be correct by the president, the officer of the corporation having charge of its books of account, or the person presiding at a meeting of the board.
[N.J.S.A. § 15A:6-14 (emphasis added).]
Therefore, a Board is encouraged to seek the advice of counsel; however, as a practical matter, the Board should always use its best business judgment in making informed decisions that affect its association and community.