The board of directors acts on behalf of a non-profit. The board decides the overall direction of the organization. It must make sure the non-profit fulfills its mission.
This article is for non-profits incorporated under Quebec law.
To learn more about federally incorporated non-profits, check out our article Non-profits: Incorporate With the Quebec Government or the Federal Government? or Corporation Canada’s website.
Also, the law allows non-profits to put different rules in their letters patent or by-laws in certain cases. If non-profits do this, the rules in the non-profit’s letters patent or by-laws apply to it instead of the legal rules described in this article.
What is the board of directors?
The board of directors is the group of people that acts on behalf of the non-profit.
Directors aren’t employees of the non-profit. But, they can be paid for the work they do. If directors are paid, the board decides the amount. This amount must be reasonable.
Paid or not, all directors are usually reimbursed for their expenses. For example, the non-profit normally pays for travel expenses when its directors need to take a trip for their work.
What does the board do?
The board makes decisions for the non-profit.
The board is responsible for the overall direction of the non-profit. It works together with the non-profit’s members, employees, and volunteers to make sure the organization fulfills its mission.
What can the board ask other people to do on its behalf?
The board can delegate running the non-profit day-to-day to an employee who isn’t on the board, like an executive director, or to one of its directors. If the board has at least seven directors, it can delegate to a group of at least three directors, called an executive committee.
The board doesn’t have to delegate running the non-profit. If it doesn’t, the whole board runs the non-profit together as a group. Also, there are certain decisions that only the board can make. This is because the law says so or because these decisions could change the organization’s structure. For example, only the board can create, modify, or cancel by-laws.
What legal duties do directors have?
First, directors must make sure their decisions respect
- the non-profit’s mission,
- its letters patent,
- its by-laws, and
- any laws that apply to the non-profit, like tax and employment laws.
Some non-profits may also have a code of ethics for their directors.
Second, directors must do their job carefully and as well as they can. This can mean
- staying informed about the non-profit’s activities and finances,
- getting reports from employees, like the executive director, or advice from experts, like lawyers and accountants,
- making decisions based on reliable information,
- identifying what needs to be done and doing it as soon as possible,
- hiring competent people, and
- investigating when something seems wrong.
Not all directors are held to the same standard for being careful and doing their best. For example, directors who are chosen because they’re experts in a certain area, like a lawyer or an accountant, are expected to know more than the average director about their area of expertise.
Finally, directors must be honest and loyal to the non-profit. They must always do what they think is best for the non-profit and put its interests first. Read our article on conflicts of interest to learn more about what it means to be honest and loyal.
Who chooses the board of directors?
Directors can also be members of the non-profit, but it’s not required by law.
If a director leaves before the end of a term, who gets to choose the replacement director depends on whether the board still has quorum. Quorum means the number of directors that are needed for the board to be able to make decisions.
If the board has quorum, it can choose a new director to fill the empty spot until the next election. If it doesn’t, the members choose.
The process and requirements are different for choosing the first directors when creating a non-profit. Check out our guide on this topic for more information.
Do the board’s decisions need to be approved by the non-profit’s members?
Generally, the board doesn’t need anyone to approve its decisions.
But, certain decisions require the approval of two-thirds of the non-profit’s members. Examples include borrowing money or creating an executive committee.
The non-profit’s by-laws are a special case. Only the board can change them. Changes made by the board apply until the next members’ meeting. Most by-law changes must be approved by members at this meeting to become permanent.
What if the non-profit’s members disagree with the board’s decisions?
If members of a non-profit are unhappy with the board’s decisions, they can vote for different directors at the next election. Members normally can’t dismiss directors before the end of their term.
Members usually don’t have to give reasons for not re-electing directors.
Who’s responsible for the board’s decisions?
The non-profit is usually responsible for the board’s decisions, not the board itself.
But, directors can be personally responsible for their decisions if they
- are careless,
- intentionally do something wrong,
- act without the permission of the other directors,
- don’t respect the non-profit’s letters patent or by-laws,
- commit a crime, or
- break other laws that create specific responsibilities for directors.
If directors do these things, a court may order them to pay compensation for causing harm or serve a sentence for breaking the law.
Directors can also sometimes be personally responsible in situations where the non-profit is the one breaking the law. This is because some laws create consequences for directors who allow a non-profit to break these laws or participate in breaking these laws on behalf of a non-profit.
Also, directors must personally reimburse the government for amounts owed by the non-profit in certain cases. Examples include
- source deductions from employee salaries,
- sales tax, and
- contributions to the Commission des normes, de l’équité, de la santé et de la sécurité du travail (CNESST or labour standards, pay equity and workplace health and safety board).
Directors can still be personally responsible even if they are unpaid volunteers. But, legal consequences may sometimes be less serious for unpaid volunteers.
Directors must understand and respect their legal responsibilities. For more information or advice on their specific situation, directors should consult professionals, like a lawyer or an accountant.
How can non-profits and their boards manage risk?
Non-profits can buy insurance to pay for harm caused by directors’ decisions. With or without insurance, non-profits can reimburse directors for lawsuit-related expenses if the director didn’t do anything wrong and the members agree to this reimbursement.
Follow this link to learn about other ways non-profits can manage risk.
Directors can vote against decisions they disagree with to avoid being personally responsible for them. Even if the decision passes by majority vote, directors can ask for their disagreement to be written down in the official meeting minutes.
Directors can consult a professional, like a lawyer or an accountant, if they need advice on a specific decision.