10A-3A-8.42. Standards of Conduct for Officers.
Division C of Article 3 of Chapter 1 shall not apply to this chapter. Instead:
(a) An officer, when performing in that capacity, has the duty to act:
(1) in good faith;
(2) with the care that a person in a like position would reasonably exercise under similar circumstances; and
(3) in a manner the officer reasonably believes to be in the best interests of the nonprofit corporation.
(b) The duty of an officer includes the obligation:
(1) to inform the superior officer to whom, or the board of directors or the board committee to which, the officer reports of information about the affairs of the nonprofit corporation known to the officer, within the scope of the officer’s functions, and known to the officer to be material to the superior officer, board of directors, or board committee; and
(2) to inform the officer’s superior officer, or another appropriate person within the nonprofit corporation, or the board of directors, or a board committee, of any actual or probable material violation of law involving the nonprofit corporation or material breach of duty to the nonprofit corporation by an officer, employee, or agent of the nonprofit corporation, that the officer believes has occurred or is likely to occur.
(c) In discharging the officer’s duties, an officer who does not have knowledge that makes reliance unwarranted is entitled to rely on:
(1) the performance of properly delegated responsibilities by one or more employees, one or more volunteers of the nonprofit corporation, or one or more other persons associated with the nonprofit corporation, to whom that officer has delegated responsibilities and whom the officer reasonably believes to be reliable and competent in performing the responsibilities delegated;
(2) information, opinions, reports, or statements, including financial statements and other financial data, prepared or presented by one or more officers or employees, one or more volunteers of the nonprofit corporation, or one or more other persons associated with the nonprofit corporation, whom the officer reasonably believes to be reliable and competent in the matters presented, or legal counsel, public accountants, or other persons retained by the nonprofit corporation as to matters involving skills or expertise the officer reasonably believes are matters: (i) within the particular person’s professional or expert competence, or (ii) as to which the particular person merits confidence; or
(3) volunteers of the nonprofit corporation or one or more persons associated with the nonprofit corporation.
(d) An officer is not liable to the nonprofit corporation or its members for any decision to take or not to take action, or any failure to take any action, as an officer, if the duties of the office are performed in compliance with this section. Whether an officer who does not comply with this section shall have liability will depend in such instance on applicable law, including those principles of Section 10A-3A-8.31 that have relevance.
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(Act 2023-503, §1.)
