Each year, thousands of churches across the country close. If you are on a board of a church that is likely to close, you may be tempted to just walk away from the church, its property, its debts, and its other obligations. But you should resist this temptation, because you may be personally liable if the church’s corporate affairs are not wound up the right way. Here a just three ways church board members risk personal liability:
- Liability for Gross Negligence and Breach of Fiduciary Duties. Church board members are legally responsible for putting the interests of the church ahead of their own interests. They may be held personally liable if they are grossly negligent in their handling of the church’s interests. So long as the church is legally in existence, board members need to carry out their fiduciary responsibilities to the church, this includes the responsibilities attendant to closing the church.
- Liability for Failing to Follow Dissolution Clauses in Articles of Incorporation and Bylaws. Churches often have dissolution provisions in their articles of incorporation and bylaws. These provisions govern how and when the church corporation can be dissolved. They also usually dictate how church assets are to be distributed upon dissolution. Church board members risk personal liability if they distribute church assets in a manner that contravenes the terms of a dissolution clause.
- Liability for Failing to Account for and Pay the Church’s Debts. When closing a church, church board members should do a comprehensive review of the church’s assets and debts. Before the church’s remaining assets can be distributed, church board members must make sure that the church’s debts and creditors are fully paid. Otherwise, creditors may come after the church board members personally.
In order to limit liability and reduce risk, church boards should work closely with professionals that have helped churches close the right way. If your church would like assistance with the many legal issues that arise when closing a church, the attorneys at Dalton & Tomich are here to help.
