How to Sue a Nonprofit's Board of Directors

By Anna Assad

A nonprofit's board of directors is the agency's managing group. The board of directors are responsible for the nonprofit's decisions -- such as how to spend grant money -- and must follow the bylaws, the nonprofit's internal rules. A person or organization can sue the board of directors. For example, one or more directors can sue the rest of the board, as well as past and present staff members. A person the nonprofit has helped, donors, members of an organization associated with the nonprofit and another party the nonprofit injured, such as an unpaid vendor, can also sue. Since a nonprofit is a type of corporation, its directors have limited personal liability for debt the nonprofit incurs because of a lawsuit award.

A nonprofit's board of directors is the agency's managing group. The board of directors are responsible for the nonprofit's decisions -- such as how to spend grant money -- and must follow the bylaws, the nonprofit's internal rules. A person or organization can sue the board of directors. For example, one or more directors can sue the rest of the board, as well as past and present staff members. A person the nonprofit has helped, donors, members of an organization associated with the nonprofit and another party the nonprofit injured, such as an unpaid vendor, can also sue. Since a nonprofit is a type of corporation, its directors have limited personal liability for debt the nonprofit incurs because of a lawsuit award.

Step 1

Gather all evidence. For example, possible evidence for a vendor who wasn't paid is the original sale contract, proof of any money the vendor received from the nonprofit and emails or letters from the nonprofit regarding the sale.

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Step 2

Talk to people who witnessed the board's actions or have firsthand knowledge. Confirm the witnesses have information that supports the case. Make a list of witnesses.

Step 3

Go to the official website of the state judiciary system to determine in what court you must file. You usually need to file in the civil trial court, but rules vary by jurisdiction.

Step 4

Go to the court in person. Bring copies of the evidence and the witness list. Ask for the forms needed to file a compliant — the paper that states your case and starts the lawsuit — a copy of the court rules and a fee schedule. Read the court rules to find out what you must do. Follow the rules and file the complaint and supporting papers to start the case.

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References

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Wisconsin Non-Profit Laws

A nonprofit is an organization formed to serve the public good, such as for a charitable, scientific, religious or educational purpose. The goal of a nonprofit is not to create profits for investors. The Wisconsin nonprofit laws provide guidelines for forming and operating a nonprofit in the state. Nonprofits generally follow the requirements of non-stock corporations, but have strict restrictions on profit distributions. All nonprofits should be careful to follow the legal requirements of their states, and may face fines or dissolution if not in compliance.

California 501C Non Profit Organization Rules

Although there are rules and regulations for nonprofit organizations in California, 501(c) organizations are, by definition, federally regulated by the IRS. Nonprofits must first register with the state of California before applying for exempt status with the IRS. There are a number of obligations that a nonprofit must meet before it is granted 501(c) status.

Liability of the Directors of a Nonprofit Corporation

When a nonprofit corporation loses a lawsuit or otherwise owes money, the general rule is that individual members of the board of directors are not personally responsible. However, there are several exceptions to this rule. It is essential that the directors understand their roles and responsibilities before accepting a position on the board. In addition, many nonprofits, particularly larger organizations with more exposure to possible liability, purchase directors and officers liability insurance to further protect the board.

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