HomeMy WebLinkAboutStatutory Duties and Liabilities of Directors Br ant
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M llle r Attorne~rs at Law
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Tallahassee, FL 32301
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MEMORANDUM
TO: Dan McIntyre
Board of Directors of Solar and Energy Loan Fund of St. Lucie County, Inc.,
a Florida nonprofit corporation (the "CDFI")
FROM: Bryant Miller Olive P.A.
DATE: August 25, 2010
RE: Statutory Duties and Liabilities of Directors
This is in response to your request for a summary of the duties and liabilities of the
members of the Board of Directors (the "Directors") of the above referenced CDFI. The
following is an outline of the current statutory rules regarding the duties, standards and
limitations on the liability of directors of Florida nonprofit corporations.
A. Duties. Section 617.081, Florida Statutes, expressly provides that all corporate
powers must be exercised 'by or under the authority of," and the affairs of the corporation
managed under the direction of, its board of directors, subject to any limitation set forth in the
articles of incorporation. The board of directors is responsible for the overall management of
the corporation.
B. Standard of Care. The general standards applicable to directors of Florida
nonprofit corporations are set forth in Section 617.0830, Florida Statutes. According to Section
617.0830(1), a director must discharge his or her duties as a director (and as a member of any
committee): (a) in good faith; (b) with the care an ordinarily prudent person in a like position
would exercise under similar circumstances; and (c) in a manner he or she reasonably believes
to be in the best interests of the corporation.
Section 617.0830(2), Florida Statutes, provides that a director of a nonprofit corporation
may rely on information, opinions, reports, statements and financial data prepared by the
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corporation's officers, employees, legal counsel, certified public accountants or other persons,
and committees, so long as he or she reasonably believes the person or committee preparing
and/or presenting it is reliable and competent in the matters presented. According to Section
617.0830(3), Florida Statutes, a director is not acting in good faith if he or she has knowledge
concerning the matter in question that makes his or her reliance unwarranted.
C. Director Conflicts of Interest. In general, a director of a corporation has a conflict
of interest in the case of a contract or transaction involving the corporation and such director (or
another entity in which the director has an interest). However, a contract or transaction
involving such a conflict will generally not be void or voidable if the contract or transaction is
approved in accordance with Section 617.0832, Florida Statutes.
Section 617.0832(1)(a) provides that it is sufficient if the director's relationship or interest
is disclosed or known to the board of directors or committee that approves or ratifies the
contract or transaction, and it is approved by a vote or consent sufficient for the purpose
without counting the vote of the interested director. For purposes of this rule only, all that is
required is the vote or approval of a majority of the "non-interested" directors. However, such a
contract or transaction may not be approved by a single director. (See Section 617.0832(2).)
Also, Section 617.0832(1)(b) provides that such a contract or transaction may be approved by
vote or written consent of the corporation's members where the director's interest is disclosed.
However, if the "conflicted" director is also a member, his or her vote is not to be counted. (See
Section 617.0382(3).) Even where the interested director's relationship has not been disclosed,
Section 617.0832(1)(c) provides that the approval of such a contract or transaction by the
corporation's board or its members may still be valid if the contract or transaction "is fair and
reasonable as to the corporation at the time it is authorized
D. Liability of Directors. Section 617.0831, Florida Statutes, generally provides that
directors of nonprofit corporations shall be subject to the same limitations on liability for their
actions, and the same rights to indemnification by their corporations, as provided for the
directors of for profit corporations under Sections 607.0831 and 607.0850, Florida Statutes
(governing liability and indemnification of officers and directors of for profit corporations).
Section 617.0834, Florida Statutes, provides greater protection to the officers and
directors of a nonprofit corporation that also qualifies as an exempt organization recognized
under section 501(c)(3), (c)(4), (c)(5) or (c)(6) of the Internal Revenue Code of 1986, as amended
("I.R.C."). That section provides that a director of a nonprofit corporation that qualifies for
exempt status under I.R.C. 501(c)(3) is not personally liable for monetary damages to any
person for any statement, vote, decision or failure to take any action regarding organizational
management or policy, unless he or she breached or failed to perform his or her duties as a
director and the breach constitutes (i) a violation of a criminal law (unless the director had
reasonable cause to believe his or her action was lawful); (ii) a transaction in which the director
derived an improper benefit; or (iii) recklessness or an act or omission committed in bad faith or
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with malicious purpose or in a manner exhibiting wanton and willful disregard of human
rights, safety or property.
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