(a) Each member of the board of directors, when discharging the duties of a director, shall act:
(1) In good faith; and
(2) In a manner the director reasonably believes to be in the best interests of the nonprofit corporation.
(b) The members of the board of directors or a committee of the board, when becoming informed in connection with their decision-making function or devoting attention to their oversight function, shall discharge their duties with the care that a person in a like position would reasonably believe appropriate under similar circumstances.
(c) In discharging board or committee duties a director shall disclose, or cause to be disclosed, to the other board or committee members information not already known by them but known by the director to be material to the discharge of their decision-making or oversight functions, except that disclosure is not required to the extent that the director reasonably believes that doing so would violate a duty imposed by law, a legally enforceable obligation of confidentiality, or a professional ethics rule.
(d) In discharging board or committee duties, a director who does not have knowledge that makes reliance unwarranted may rely on the performance by any of the persons specified in subsection (f)(1), (3), or (4) of this section to whom the board may have delegated, formally or informally by course of conduct, the authority or duty to perform one or more of the board's functions that are delegable under applicable law.
(e) In discharging board or committee duties a director who does not have knowledge that makes reliance unwarranted may rely on information, opinions, reports, or statements, including financial statements and other financial data, prepared or presented by any of the persons specified in subsection (f) of this section.
(f) A director may rely, in accordance with subsection (d) or (e) of this section, on:
(1) One or more officers, employees, or volunteers of the nonprofit corporation whom the director reasonably believes to be reliable and competent in the functions performed or the information, opinions, reports, or statements provided;
(2) Legal counsel, public accountants, or other persons retained by the corporation as to matters involving skills or expertise the director reasonably believes are matters:
(A) Within the particular person's professional or expert competence; or
(B) As to which the particular person merits confidence;
(3) A committee of the board of directors of which the director is not a member if the director reasonably believes the committee merits confidence; or
(4) In the case of a religious corporation, religious authorities and ministers, priests, rabbis, imams, or other persons whose positions or duties the director reasonably believes justify reliance and confidence and whom the director believes to be reliable and competent in the matters presented.
(g) A director shall not be a trustee with respect to the nonprofit corporation or with respect to any property held or administered by the corporation, including property that may be subject to restrictions imposed by the donor or transferor of the property.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For history of Law 18-378, see notes under § 29-101.01.
(a) A director shall not be liable to the nonprofit corporation or its members for any decision to take or not to take action, or any failure to take any action, as a director, unless the party asserting liability in a proceeding establishes that:
(1) None of the following, if interposed as a bar to the proceeding by the director, precludes liability:
(A) Subsection (d) of this section or a provision in the articles of incorporation authorized by § 29-402.02(c);
(B) Satisfaction of the requirements in § 29-406.70 for validating a conflicting interest transaction; or
(C) Satisfaction of the requirements in § 29-406.80 for disclaiming a business opportunity; and
(2) The challenged conduct consisted or was the result of:
(A) Action not in good faith;
(B) A decision:
(i) Which the director did not reasonably believe to be in the best interests of the corporation; or
(ii) As to which the director was not informed to an extent the director reasonably believed appropriate in the circumstances; or
(C) A lack of objectivity due to the director's familial, financial, or business relationship with, or a lack of independence due to the director's domination or control by, another person having a material interest in the challenged conduct:
(i) Which relationship or which domination or control could reasonably be expected to have affected the director's judgment respecting the challenged conduct in a manner adverse to the corporation; and
(ii) After a reasonable expectation to such effect has been established, the director has not established that the challenged conduct was reasonably believed by the director to be in the best interests of the corporation;
(D) A sustained failure of the director to devote attention to ongoing oversight of the activities and affairs of the corporation, or a failure to devote timely attention, by making, or causing to be made, appropriate inquiry, when particular facts and circumstances of significant concern materialize that would alert a reasonably attentive director to the need therefor; or
(E) Receipt of a financial benefit to which the director was not entitled or any other breach of the director's duties to deal fairly with the corporation and its members that is actionable under applicable law.
(b) The party seeking to hold the director liable:
(1) For money damages, also has the burden of establishing that:
(A) Harm to the nonprofit corporation or its members has been suffered; and
(B) The harm suffered was proximately caused by the director's challenged conduct;
(2) For other money payment under a legal remedy, such as compensation for the unauthorized use of corporate assets, also has whatever persuasion burden may be called for to establish that the payment sought is appropriate in the circumstances; or
(3) For other money payment under an equitable remedy, such as profit recovery by or disgorgement to the corporation, also has whatever persuasion burden may be called for to establish that the equitable remedy sought is appropriate in the circumstances.
(c) Nothing contained in this section:
(1) In any instance where fairness is at issue, such as consideration of the fairness of a transaction to the nonprofit corporation under § 29- 406.70(a)(3), alters the burden of proving the fact or lack of fairness otherwise applicable;
(2) Alters the fact or lack of liability of a director under another section of this chapter, such as the provisions governing the consequences of an unlawful distribution under § 29-406.33, a conflicting interest transaction under § 29-406.70, or taking advantage of a business opportunity under § 29- 406.80; or
(3) Affects any rights to which the corporation or a director or member may be entitled under another statute of the District or the United States.
(d) Notwithstanding any other provision of this section, a director of a charitable corporation shall not be liable to the corporation or its members for money damages for any action taken, or any failure to take any action, as a director, except liability for:
(1) The amount of a financial benefit received by the director to which the director is not entitled;
(2) An intentional infliction of harm;
(3) A violation of § 29-406.33; or
(4) An intentional violation of criminal law.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For history of Law 18-378, see notes under § 29-101.01.
(a) A nonprofit corporation shall not lend money to or guarantee the obligation of a director or officer of the corporation.
(b) This section shall not apply to:
(1) An advance to pay reimbursable expenses reasonably expected to be incurred by a director or officer;
(2) An advance to pay premiums on life insurance if the advance is secured by the cash value of the policy;
(3) Advances pursuant to part E of this subchapter;
(4) Loans or advances pursuant to employee benefit plans;
(5) A loan secured by the principal residence of an officer; or
(6) A loan to pay relocation expenses of an officer.
(c) The fact that a loan or guarantee is made in violation of this section shall not affect the borrower's liability on the loan.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For history of Law 18-378, see notes under § 29-101.01.
(a) A director who votes for or assents to a distribution made in violation of this chapter shall be personally liable to the nonprofit corporation for the amount of the distribution that exceeds what could have been distributed without violating this chapter if the party asserting liability establishes that, when taking the action, the director did not comply with § 29-406.30.
(b) A director held liable under subsection (a) of this section for an unlawful distribution shall be entitled to:
(1) Contribution from every other director who could be held liable under subsection (a) for the unlawful distribution; and
(2) Recoupment from each person of the pro-rata portion of the amount of the unlawful distribution the person received, whether or not the person knew the distribution was made in violation of this chapter.
(c) A proceeding to enforce:
(1) The liability of a director under subsection (a) of this section shall be barred unless it is commenced within 2 years after the date on which the distribution was made; or
(2) Contribution or recoupment under subsection (b) of this section shall be barred unless it is commenced within one year after the liability of the claimant has been finally adjudicated under subsection (a) of this section.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For history of Law 18-378, see notes under § 29-101.01.
