Index of Terms (non-exhaustive)

liability - director

Liability.  What liability do directors and officers have under the law?  None, if they act with what is commonly called "business judgment," which is carrying out of the director's duties:
      (1) in good faith,
      (2) with care an ordinarily prudent person in a like position would exercise under similar circumstances, and
      (3) in a manner the director reasonably believes to be in the best interests of the corporation.

The law states that a director or officer is not liable to the nonprofit corporation or its members for any action taken, or any failure to take any action, as an officer or director, as the case may be, unless:
      (1) the director or officer has breached or failed to perform the duties of the office:
            (a) in good faith,
            (b) with the care an ordinarily prudent person in a like position would exercise under similar circumstances, and 
            (c) in a manner the director reasonably believes to be in the best interests of the corporation, and
      (2) the breach or failure to perform constitutes:
            (a) willful misconduct; or
            (b) intentional infliction of harm on the nonprofit corporation or the members; or
            (c) gross negligence.

(See Utah Code Subsections 16-6a-822(2) and (6)).

A director who relies on counsel of an attorney may be entitled to a stronger presumption that the director acted with "business judgment," and thus that the director is entitled to liability protection.  See Utah Code Subsections 16-6a-822(3).

For indemnification of directors and advance of defense expenses of directors, see Sections 16-6a-901 through 910.

Indemnification Provisions - See Also.  Regarding provisions for indemnification and limitations on liability of board members, see also the following sections in the Condo Act and Community Association Act authorizing the association's rules to provide for indemnification of board members, and authorizing any of the documents related to the formation or operation of the nonprofit corporation to provide for liability limitation, as well as indemnification:

  • Utah Code Sections 57-8-8.1(5)(d) and 57-8a-218(13)(d) (2018) ("(13) Unless otherwise provided in the declaration, an association may by rule: . . . (d) provide for the indemnification of the association’s officers and board consistent with Title 16, Chapter 6a, Utah Revised Nonprofit Corporation Act." 57-8a-218(13)(d)).
  • Utah Code Sections 57-8-40(4) and 57-8a-228(4) (2018) ("Notwithstanding any conflict with the declaration or any recorded bylaws, the organizational documents of a nonprofit corporation or other entity formed in accordance with Subsection (2) may include an additional indemnification and liability limitation provision for: (a) board members or officers; or (b) similar persons in a position of control." 57-8a-228(4)).
  • Utah Code Section 57-8-10.3 (2018) (". . . the organizational documents of an association of unit owners may indemnify and limit management committee member and officer liability to the extent permitted by the law under which the association of unit owners is organized.").
16-6a-822. General standards of conduct for directors and officers
16-6a-823. Limitation of liability of directors
16-6a-824. Liability of directors for unlawful distributions
16-6a-902. Authority to indemnify directors
16-6a-903. Mandatory indemnification of directors
16-6a-904. Advance of expenses for directors
57-8-10.3. Indemnification and limit of liability
57-8-40. Organization of an association of unit owners under other law -- Reorganization
57-8a-228. Organization of an association -- Governing document hierarchy -- Reorganization
Reedeker v. Salisbury (director liability, ultra vires, CC&Rs are a contract, interpretation, governing law) '98