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Serving on a nonprofit board is a meaningful way to support causes you care about, but it’s not without risk. In Georgia, nonprofit board members have a legal duty to act in good faith, with reasonable care, and in the best interests of the organization.

While most directors are insulated from personal liability, that protection isn’t absolute. A misstep by the board or organization can still lead to scrutiny, and individual members may be named in lawsuits or regulatory investigations, especially if fiduciary duties are breached.

When Can Board Members Be Personally Liable?

Most liability protection for board members comes from Georgia’s nonprofit corporate statutes and the organization’s own governing documents. However, board members may still be held personally liable in situations such as:

• Intentional misconduct or fraud: Directors are not protected if they knowingly commit or approve fraudulent acts or break the law.
  
  
• Gross negligence: If a board member ignores obvious red flags or fails to exercise reasonable oversight, courts may find them liable for resulting harm.
  
  
• Breach of fiduciary duties: This includes failure to act with loyalty, care, or obedience to the nonprofit’s mission.
  
  
• Conflict of interest violations: Undisclosed self-dealing or improper benefits from nonprofit transactions can trigger IRS penalties or lawsuits.

Although less common, board members can potentially face derivative actions from donors, members, or even other board members alleging harm to the organization due to governance failures.

Key Legal Safeguards for Nonprofit Board Members

Review Indemnification Clauses in the Bylaws

Most well-drafted nonprofit bylaws include indemnification language that states the organization will cover legal expenses and liability judgments for board members acting in good faith. However, indemnification isn’t automatic, and it typically doesn’t apply to acts involving fraud or gross negligence. Before accepting a board position, prospective members should review the bylaws and confirm:

• The organization has authority to indemnify directors under Georgia law.
• There are no narrow limitations that exclude common risks.
• The board has a policy for approving or denying indemnification requests.

Ensure the Organization Has Adequate D&O Insurance

Directors and Officers (D&O) liability insurance is a key protection tool that covers legal defense costs and settlements for board members named in lawsuits. A D&O policy typically includes:

• Broad coverage for both individual directors and the organization.
• No exclusions for common nonprofit activities.
• Coverage for employment practices and fiduciary liability.

Before joining a board, a smart step is to confirm the policy is current and has sufficient policy limits for the size and scope of the nonprofit.

Participate in Governance and Oversight

Protection is strongest when directors can show they exercised reasonable oversight. Board members should:

• Attend meetings regularly and review materials in advance.
• Ask questions and voice dissent when appropriate.
• Insist on clear financial reporting and review budgets.
• Disclose any potential conflicts of interest in writing.

Meeting minutes should reflect that the board made decisions after reviewing the relevant facts and considering alternatives.

Understand Fiduciary Duties

Every board member has three core fiduciary duties under Georgia law:

• Duty of care: Make informed decisions using appropriate diligence.
• Duty of loyalty: Act in the best interests of the organization, not personal gain.
• Duty of obedience: Ensure the nonprofit operates in line with its mission and applicable laws.

Violations of these duties are one of the most common bases for director liability.

Get Legal Advice When Needed

Board members asked to approve an unusual transaction, change financial procedures, or vote on a matter with a potential conflict should not be afraid to ask for legal guidance. Individual board members have the right to consult with nonprofit general counsel, or even their own attorney, before taking action.

Serving Safely Starts With Smart Preparation

Good governance, a thorough understanding of obligations, and a willingness to speak up when something feels wrong are all keys to liability protection. A single scandal or lawsuit can follow a director for years, even if they are not directly responsible.

If you’re unsure whether your organization’s governance practices, bylaws, or insurance coverage are sufficient to shield you, consulting with an experienced nonprofit attorney in Atlanta is a good idea.

Consult an Atlanta Nonprofit Attorney for Board Risk Management

Cameron Hawkins provides ongoing counsel to nonprofit board members and executives across Georgia. From reviewing bylaws to evaluating D&O insurance policies and advising on conflict of interest disclosures, our office helps protect individuals who serve in good faith. Call (678) 921-4225 to schedule a consultation.