The opinion
Honorable Mike Dugger State Representative Route 2, Box 228 Hope, AR 71801
Dear Representative Dugger:
You requested an opinion from our office as to the potential liability of the Directors of a non-profit corporation providing services to handicapped people. Your specific question addressed whether or not there are any, "state statutes that protect individuals that serve on such boards?"
Prior to the passage of Act 970 of 1987 there were no statutory provisions granting limited tort immunity to Directors of non-profit corporations. This Act (which has yet to be codified) becomes effective July 20, 1987. At that time it will apply to suits for recovery of damages based upon causes of action that accrue after August 1, 1987.
The Act as it applies to members of the Board of Directors of a non-profit corporation, provides that a member of the Board of Directors of a non-profit corporation, that is a corporation which holds a valid federal income tax exemption issued by the Internal Revenue Service, shall not be held personally liable for damages resulting from: (a) any negligent act or omission of an employee of the non-profit corporation or (b) any negligent act or omission of another director of that non-profit corporation.
It should be noted however, that the immunity provided by this Act does not extend to the acts or omissions of directors of a non-profit corporation which constitute ordinary or gross negligence of that director or intentional torts committed by that director. This provision of limited immunity from liability for damages resulting from any negligent act or omission of any employee of a non-profit corporation does not extend to that non-profit entity.
There are additional provisions included in Act 970 of 1987, Acts of Arkansas, dealing with non-profit corporations of a type different from the organization mentioned in your letter. There are also restraints on the transfer of corporate assets to board members as it affects immunity which might be of interest to you in light of your inquiry. For your reference I am enclosing a copy of Act 970 of 1987.
Additionally, I am enclosing a copy of the case, J.W. Resort, Inc. v. First American National Bank and Lena Bell Young, Co-Trustees of the Harold A. Young Trust, 3 Ark. App. 290 , 625 S.W.2d 557
(1981). Though the issues dealt with in that case are slightly outside the scope of your specific question, the case law approach to immunity from tort liability granted to charitable non-profit corporations as articulated in that case might also be of interest to you.
The foregoing opinion, which I hereby approve, was prepared by Assistant Attorney General Kay J. Jackson Demailly.