SENATE BILL REPORT

SB 5141

BYSenators Talmadge and Newhouse

Permitting limitations on the personal liability of directors of nonprofit corporations.

Senate Committee on Judiciary

Senate Hearing Date(s):March 4, 1987

Senate Staff:Dick Armstrong (786-7460)

AS OF FEBRUARY 25, 1987

BACKGROUND:

Many corporations are experiencing difficulty in getting qualified persons to serve on their board of directors because of lawsuits by shareholders claiming the directors are personally liable for acts or omissions performed in official capacities. 

SUMMARY:

Statutes on nonprofit corporations are amended to allow the articles of incorporation to include a provision eliminating or limiting the personal liability of a director for damages caused by any action taken by the director in good faith. Such provisions may not limit a director's liability for acts involving intentional misconduct, such as a knowing violation of the law or knowing breach of the director's fiduciary duty to the corporation.

Technical changes are also made to the nonprofit corporations statute.

Fiscal Note:      none requested