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MShore Law
MShore Law, Attorney
Category: Business Law
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Experience:  Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements
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In January 2010 I joined the board of Directors of a 40 year

Resolved Question:

In January 2010 I joined the board of Directors of a 40 year old 501c3 arts Guild in Durham North Carolina. This organization is an Art guild with 150+ member artists who participate in an art fair once a year run by the the Guild.
Through the course of the year, the Board had some potential "Self Dealing" conflicts within the board of directors that we worked on to make them above board and properly dealt with.
We had done some minimal budgetary review throughout the year and then in December 2010 I was made aware that the "budget" we had been looking at was only for the art fair - not the entire organization. In fact there was a "separate" budget that was not included in the "fair budget" I had seen that was funded by membership dues. It was overseen by the executive committee and the finance committee but expenditures are not visible to the entire board. Since then I have not been able to get any accounting of this budget, what it pays for etc. and it has caused much friction within the board. The resulting non-accounted amount appears to be in the range of a few thousand dollars.

Here's the questions:

What is my potential PERSONAL liability as a member of the board of directors should I choose to drop this issue and just work on doing things properly going forward? I'm concerned about potential future litigation issues associated with this impacting my PERSONAL & BUSINESS life outside of this board.
Submitted: 3 years ago.
Category: Business Law
Expert:  MShore Law replied 3 years ago.
Thank you for the post, I am happy to assist you by answering your questions. If you have no direct dealings with the respect to the allocation of the non-profit's resources, your personal liability is not an issue (unless the self dealing involves tax fraud). I assume there is a record of your attempts to cure these issues via the board meeting minutes.
Customer: replied 3 years ago.
We've only had one meeting since December and I looked in the minutes and it's not mentioned that I was looking for an accounting.

If I don't get an answer by the next meeting, should I ask again at the Feb. meeting and request that my query be reflected in the minutes? If I do this, you feel comfortable I will be personally ptotected from potential future litigation?

And your saying as a member of the board of directors I don't have a fidicuary responsibility to our shareholders to pursue this beyond this point?

Expert:  MShore Law replied 3 years ago.
Hello, you should ask again during the next meeting and request that such request be reflected in the minutes. You should also note your prior request and lack of response.

While you have a fiduciary responsibility to your shareholders, absent fraud on your part, your personal liability for the breach of that fiduciary duty is limited to your removal from your post as a director and the repayment of any funds you acquired from the 501c3 via fraud.
MShore Law, Attorney
Category: Business Law
Satisfied Customers: 25285
Experience: Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements
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