Church board members have been placed in a position of trust, and they have a legal responsibility to place the church’s interests ahead of their own. This duty is known as their fiduciary responsibility.
If board members use their position in the church for personal gain, they can be sued as individuals, thereby placing their home and personal assets at risk. But the same laws that protect corporate board members in the secular world can also help protect ministry board members who are acting in good faith.
The duty of board members to act in the best interests of the organization will apply, whether the church is incorporated or not. Every jurisdiction provides protection for board members of incorporated entities, as long as the board member acts with honest intentions. There’s generally less legal protection afforded to board members of an unincorporated ministry organization, meaning that the assets of these board members are generally more at risk.
The protection offered to board members of incorporated organizations can apply to liability arising out of injuries, contractual obligations, and other forms of liability created by statute.
If you haven’t already done so, consider speaking with a local attorney about incorporating the ministry. Taking this step will help reduce the likelihood that board members could 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. These requirements can be summarized as the “Prudent Person Rule” and the “Duty of Loyalty.”
The duty of loyalty can also be breached if a board member receives an indirect financial gain. For example, a board member who makes a decision or takes an action that’s intended to negatively affect a personal competitor could be considered to be a breach of the duty of loyalty to the church.
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. Board members are held to a higher standard of accountability than others in the congregation. 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 losses.
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