The duty of board members to act in the best interests of the organization, sometimes known as fiduciary responsibility, will apply whether the church is incorporated or not. However, business laws offer more protection to board members of incorporated ministries than unincorporated ones. If you haven’t already done so, talk with a local attorney about incorporating the ministry. This will help reduce the likelihood that board members will be held personally liable for the decisions they make while serving on the church board.
There are two primary requirements that board members must follow in order to obtain corporate protection:
The Prudent Person Rule. Board members have a duty to think matters through before making key decisions. The prudent person rule basically states that a board member will be protected from personal responsibility unless a “reasonably prudent person” would have avoided similar actions or decisions. Be sure to document in your board minutes that key decisions were discussed and carefully considered before the board came to a final decision.
The Duty of Loyalty. Board members have a duty to avoid conflicts of interest. The duty of loyalty requirement states that board members will be protected against personal liability as long as their actions and decisions aren’t intended to provide them with personal gain. The most common breach of the duty of loyalty occurs when a board member votes in favor of an action that will either provide him or his family a personal financial gain or benefit a business that he owns or controls. Although financial gain is a common motive for breaching one’s duty to the organization, a board member can also breach the duty of loyalty without benefiting financially.
As a safeguard, the church should consider adding bylaw provisions that:
Members of the church governing board are responsible for guiding the church and helping the ministry fulfill its mission. By placing the interests of the church above their own, they will not only better serve the church, but can also protect themselves from legal liability, fines, and other out-of-pocket loss.
If you found this information helpful, you might be interested in these other resources from Brotherhood Mutual:
Learn more about a board member's legal duties in the full article, Are Church Board Members Personally Liable for Board Decisions?
You might also be interested in reading Ten Things Every Church Board Member Should Know.
For more information on ministry incorporation, see Incorporate Your Church.
Visit our Safety Library to find other articles, publications and tools on wide range of topics relevant to your ministry.
*Important information: Brotherhood Mutual is pleased to provide Legal Assist as a complimentary resource. The services we offer through Legal Assist are intended to provide general legal information to our current and prospective policyholders.
The information we provide is intended to be helpful, but it does not constitute legal advice and is not a substitute for the advice from a licensed attorney in your area. Accordingly, no attorney/client relationship is created through this process, and no legal advice will be provided. We strongly encourage you to regularly consult with a local attorney as part of your risk management program.
Thank you for your interest in Brotherhood Mutual. We appreciate the opportunity to provide your church or other ministry with an insurance quote and will reply to your request as soon as possible.
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