Coordinating Council for
Children in Crisis, Inc.
131 Dwight Street
New Haven, CT
06511

Phone:
(203) 624-2600

Fax:
(203) 562-6232

Email:
info@ccccnh.org

NOTICE OF
PRIVACY PRACTICES

Board of Directors

Legal Responsibilities of Directors of Non-Stock Corporations

The Coordinating Council For Children In Crisis (CCCC) is a non-stock corporation organized under the laws of the State of Connecticut. The corporation’s Certificate of Incorporation has not been reviewed, but its by-laws provide that there shall be one class of members and that the total elected membership shall function as the Board of directors which shall consist of not less than ten persons. This structure is somewhat atypical since a member is in concept analogous to a shareholder of a stock corporation who in turn elect representatives to the Board of Directors. What this means is that your legal responsibilities and liabilities as governed by Connecticut law may arise under either the concept of membership or directorship.

As members of the corporation, you have the right to vote on certain fundamental matters described in the CT General Statutes, such as Amendment to the Certificate of Incorporation or Merger of the Corporation. Section 33-1058 of the CT General Statutes discusses the liabilities of members and provides that a member of a corporation shall be under no obligation to the corporation or its creditors with respect to such membership other than the obligation to pay in full any fines or penalties imposed against the member in accordance with any by-laws provisions. The CCCC’s by-laws do not authorize the imposition of any fines or penalties upon members and, therefore, absent any distribution of the income or assets of the corporation to members, there is no liability exposure unless the membership authorizes such an assessment.

As directors of a non-stock corporation, you are responsible for the management of the corporation. The standard of liability under CT law is that a director shall perform his duties as a director, including his duties as a committee member, in good faith, in a manner he reasonably believes to be in the best interest of the corporation and with such care as an ordinarily prudent person in a like position would use under similar circumstances. In performing his duties, a director shall be entitled to rely on information, opinions, reports or statement, including financial statements and other financial data prepared or presented by 1) one or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented; 2) Counsel, public accountants or other persons as to matters which the director reasonably believes to be within such person’s professional or expert competence, or 3) a committee of the Board upon which he does not serve, duly designated in accordance with a provision of the Certificate of Incorporation or by-laws, as to matters within its designated authority, which committee the director reasonably believes to merit confidence, but he shall not be considered to be acting in good faith if he has knowledge concerning the matter in question that causes such reliance to be unwarranted. A person who performs his duty in accordance with this standard shall be presumed to have no liability by reason of being or having been a director of the corporation.

What happens if you get sued in your capacity as a director? The CT General Statutes provide for the indemnification of members and directors as well as officers and employees of the corporation against judgments, fines and penalties. The standards for indemnification are set forth below for your information and are quite complex. From a practical point of view, it may be unlikely that the CCCC would have the financial capacity to pay such indemnification. The corporation shall not indemnify such person unless 1) such person is successful on the merits in the defense of any such proceeding or 2) it shall be concluded by a disinterested majority of the Board Directors or independent legal counsel that such person acting in good faith and in a manner he reasonably believes to be in the best interest of the corporation and, with respect to any criminal action or proceeding, that he had no reasonable cause to believe that his conduct was unlawful or 3) the Court, on application, shall have determined that in view of all the circumstances such person is fairly and reasonably entitled to be indemnified and then for such amount as the Court will determine. In a suit against you on behalf of the corporation, the statute provides that a corporation shall indemnify such person who is made a party to any proceeding against reasonable expenses actually incurred by him in connection with such proceeding, when such person is finally adjudged not to have breached his duty to the corporation or where a court, on application, shall determine that in view of the circumstances such person is fairly and reasonably entitled to be indemnified. The corporation shall not so indemnify any such person for amounts paid to the corporation, to a plaintiff or to counsel for a plaintiff in settling or otherwise disposing of a proceeding with or without Court approval or for expenses incurred in defending a proceeding which is settled or otherwise disposed of without Court approval.

May the corporation pay your legal expenses while the suit is pending? Such expenses may be paid in advance of the final disposition of such proceeding as authorized by the Board of Directors upon agreement by or on behalf of such indemnified party to repay such amount if he or she is later found not entitled to be indemnified by the corporation as authorized by the statute. the corporation may procure insurance providing greater indemnification, but in our case, CCCC has not had the finances to do so.

With regard to the civil liabilities of directors, tort reform legislation contained in CT General Statutes 52-557 m provides a limitation for civil liabilities for directors and officers of non-profit organizations qualified as tax-exempt organization under Section 501 (c) of the Internal Revenue Code. This legislation provides that an officer or director who is not compensated for such services on a salary or prorated equivalent basis shall be immune from civil liabilities for any act or omission resulting in damage or injury occurring on or after the effective date of the Act if such person is acting in good faith and within the scope of his official functions and duties, unless such damage or injury was caused by the willful or wanton misconduct of such person. Accordingly, absent bad faith actions or wanton misconduct, directors are immune from civil liability under Connecticut law. Nonetheless, directors could be sued in a proceeding and forced to litigate their entitlement to such immunity. In such event, it is advisable for directors to determine whether their personal umbrella policies would provide them with a defense in such situations.

Board of Directors Orientation