Understanding Liabilities for Charity Directors and Members

Generally speaking, members are not exposed to legal liability directly unless they take on direct involvement in the decision-making of the organization.

Directors are liable for a number of things under corporate, tax, and employment statute, as well as having specific duties if they engage in specifically regulated activities. Some of the more common duties of concern are:

• directors have a duty to act in good faith and with reasonable care and diligence in managing the affairs of the nonprofit. They may be liable for any harm that results if they fail to uphold this duty (i.e. if they are negligent).
  
• unpaid wages to employees up to 6 months and unpaid vacation pay up to 12 months, as well as EI and CPP remittances that they fail to make. You mention you only have contractors, which may mean this doesn't currently apply, but I should note that the difference between employees and contractors is determined on the facts and not just what the people involved call the position.
  
• disclose any conflicts of interest and not participate in any meeting where it's discussed, and may be liable to account for any profits they receive as a result of a conflict of interest.

There are various ways nonprofits can protect directors, such as by getting directors and officers insurance (different from general liability), and by having a provision in its bylaws to indemnify directors for the costs that arise as a result of their fulfilling their duties in good faith and reasonably.

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