Source: https://code.dccouncil.us/dc/council/code/titles/29/chapters/4/subchapters/VI/
Timestamp: 2019-05-23 23:23:37
Document Index: 119832530

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D.C. Law Library - Subchapter VI. Directors, Officers, and Employees.
§§ 29-406.01 – 29-406.12
§§ 29-406.20 – 29-406.25
§§ 29-406.30 – 29-406.33
§§ 29-406.40 – 29-406.44
§§ 29-406.50 – 29-406.58
Part F. Conflicting Interest Transactions.
§§ 29-406.70 – 29-406.70
§§ 29-406.80 – 29-406.80
§§ 29-406.90 – 29-406.91
§ 29–406.01. Requirement for and functions of board of directors.
(a) A nonprofit corporation shall have a board of directors.
(b) Except as otherwise provided in § 29-406.12, all corporate powers shall be exercised by or under the authority of the board of directors of the nonprofit corporation, and the activities and affairs of the corporation shall be managed by or under the direction, and subject to the oversight, of its board of directors.
This section is referenced in § 29-406.25.
§ 29–406.02. Qualifications of directors.
A director of a nonprofit corporation shall be an individual. The articles of incorporation or bylaws may prescribe other qualifications for directors. A director need not be a resident of the District or a member of the corporation unless the articles or bylaws so prescribe.
§ 29–406.03. Number of directors.
(a) A board of directors shall consist of 3 or more directors, with the number specified in or fixed in accordance with the articles of incorporation or bylaws.
(b) The number of directors may be increased or decreased, but to no fewer than 3, by amendment to, or in the manner provided in, the articles of incorporation or bylaws.
§ 29–406.04. Selection of directors.
(a) The directors of a membership corporation, other than any initial directors named in the articles of incorporation or elected by the incorporators, shall be elected at the first annual meeting of members, and at each annual meeting thereafter, unless the articles or bylaws provide some other time or method of election, or provide that some or all of the directors are appointed by some other person or designated in some other manner.
(b) The directors of a nonmembership corporation, other than any initial directors named in the articles of incorporation or elected by the incorporators, shall be elected, appointed, or designated as provided in the articles or bylaws. If no method of designation or appointment is set forth in the articles or bylaws, the directors, other than any initial directors, shall be elected by the board.
§ 29–406.05. Terms of directors generally.
(a) The articles of incorporation or bylaws may specify the terms of directors. If a term is not specified in the articles or bylaws, the term of a director is one year. Except for directors who are appointed by persons that are not members or who are designated in a manner other than by election or appointment, the term of a director shall not exceed 5 years. Except as otherwise provided in the articles or bylaws, a director shall be appointed, elected, or otherwise designated for additional terms.
(b) A decrease in the number of directors or term of office shall not shorten an incumbent director’s term.
(c) Except as otherwise provided in the articles of incorporation or bylaws, the term of a director elected to fill a vacancy expires at the end of the unexpired term that the director is filling.
(d) Despite the expiration of a director’s term, the director shall continue to serve until the director’s successor is elected, appointed, or designated and until the director’s successor takes office, unless otherwise provided in the articles of incorporation or bylaws.
This section is referenced in § 29-401.50.
§ 29–406.06. Staggered terms for directors.
The articles of incorporation or bylaws may provide for staggering the terms of directors by dividing the total number of directors into groups of one or more directors. The terms of office and number of directors in each group do not need to be uniform.
(a) A director may resign at any time by delivering a signed notice in the form of a record to the chair of the board of directors or to an executive officer or the secretary of the corporation.
(b) A resignation shall be effective when the notice is delivered unless the notice specifies a later effective time.
This section is referenced in § 29-401.50 and § 29-406.10.
(a) The Superior Court may remove a director from office in a proceeding commenced by or in the right of the corporation if the court finds that:
(1) The director engaged in fraudulent conduct with respect to the corporation or its members, grossly abused the position of director, or intentionally inflicted harm on the corporation; and
(2) Considering the director’s course of conduct and the inadequacy of other available remedies, removal would be in the best interests of the corporation.
(b) A member, individual director, or member of a designated body proceeding on behalf of the nonprofit corporation under subsection (a) of this section shall comply with all of the requirements of subchapter XI of this chapter.
(c) The court, in addition to removing the director, may bar the director from being reelected, redesignated, or reappointed for a period prescribed by the court.
(e) If a proceeding is commenced under this section to remove a director of a charitable corporation, the plaintiff shall give the Attorney General for the District of Columbia notice in record form of the commencement of the proceeding.
§ 29–406.10. Vacancy on board.
(a) Except as otherwise provided in subsection (b) of this section, the articles of incorporation, or the bylaws, if a vacancy occurs on the board of directors, including a vacancy resulting from an increase in the number of directors, the vacancy may be filled by a majority of the directors remaining in office even if they constitute less than a quorum.
(b) Except as otherwise provided in the articles of incorporation or bylaws, a vacancy in the position of a director who is:
(1) Elected by a voting group of members, by a chapter or other organizational unit of members, or by a region or other geographic grouping of members, shall be filled during the first 3 months after the vacancy occurs only by that voting group or chapter, unit, region, or grouping;
(2) Appointed by persons other than the members, may be filled only by those persons; or
(3) Designated in the articles of incorporation or bylaws shall not be filled by action of the board of directors.
(c) A vacancy that will occur at a specific later time, by reason of a resignation effective at a later time under § 29-406.07(b) or otherwise, may be filled before the vacancy occurs but the new director shall not take office until the vacancy occurs.
§ 29–406.11. Compensation of directors.
§ 29–406.12. Designated body.
(a) Some, but less than all, of the powers, authority, or functions of the board of directors of a nonprofit corporation under this chapter may be vested by the articles of incorporation or bylaws in a designated body. If a designated body is created:
(1) This subchapter and other provisions of law on:
(A) The rights, duties, and liabilities of the board of directors or directors individually shall also apply to the designated body and to the members of the designated body individually; and
(B) Meetings, notice, and the manner of acting of the board of directors shall also apply to the designated body in the absence of an applicable rule in the articles of incorporation, bylaws, or internal operating rules of the designated body;
(2) To the extent the powers, authority, or functions of the board of directors have been vested in the designated body, the directors shall be relieved from their duties and liabilities with respect to those powers, authority, and functions; and
(3) A provision of the articles of incorporation regarding indemnification of directors or limiting the liability of directors adopted pursuant to § 29-402.02(b)(8) or (c) applies to members of the designated body, except as otherwise provided in the articles.
(b) Some, but less than all, of the rights or obligations of the members of a nonprofit corporation under this chapter may be vested by the articles of incorporation or bylaws in a designated body. If such a designated body is created:
(A) The rights and obligations of members shall also apply to the designated body and to the members of the designated body individually; and
(B) Meetings, notice, and the manner of acting of members shall also apply to the designated body in the absence of an applicable provision in the articles of incorporation, bylaws, or internal operating rules of the designated body;
(2) To the extent the rights or obligations of the members have been vested in the designated body, the members shall be relieved from responsibility with respect to those rights and obligations.
(c) The articles of incorporation or bylaws may prescribe qualifications for members of a designated body. Except as otherwise provided in the articles or bylaws, a member of a designated body does not need to be:
(2) A director, officer, or member of the nonprofit corporation; or
(3) A resident of the District.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720; Mar. 5, 2013, D.C. Law 19-210, § 2(d)(11), 59 DCR 13171.)
This section is referenced in § 29-406.01 and § 29-408.22.
The 2013 amendment by D.C. Law 19-210 substituted “incorporation or bylaws in a designated body” for “incorporation in a designated body” in (a).
§ 29–406.20. Meetings.
(b) Unless the articles of incorporation or bylaws provide otherwise, the board of directors may permit any or all directors to participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means shall be considered to be present in person at the meeting.
§ 29–406.21. Action without meeting.
(a) Except to the extent that the articles of incorporation or bylaws require that action by the board of directors be taken at a meeting, action required or permitted by this chapter to be taken by the board of directors may be taken without a meeting if each director signs a consent in the form of a record describing the action to be taken and delivers it to the nonprofit corporation.
(b) Action taken under this section shall be the act of the board of directors when one or more consents signed by all the directors are delivered to the nonprofit corporation. The consent may specify the time at which the action taken in the consent is to be effective. A director’s consent may be withdrawn by a revocation in the form of a record signed by the director and delivered to the corporation prior to delivery to the corporation of unrevoked consents signed by all the directors.
§ 29–406.22. Call and notice of meeting.
§ 29–406.23. Waiver of notice.
(a) A director may waive any notice required by this chapter, the articles of incorporation, or the bylaws before or after the date and time stated in the notice. Except as otherwise provided in subsection (b) of this section, the waiver shall be in the form of a record, signed by the director entitled to the notice, and filed with the minutes or corporate records.
(b) A director’s attendance at or participation in a meeting shall waive any required notice to the director of the meeting, unless the director at the beginning of the meeting, or promptly upon arrival, objects to holding the meeting or transacting at the meeting and does not thereafter vote for or assent to action taken at the meeting.
§ 29–406.24. Quorum and voting.
(a) Except as otherwise provided in subsection (b) of this section, the articles of incorporation, or the bylaws, a quorum of the board of directors shall consist of a majority of the directors in office before a meeting begins.
(b) The articles of incorporation or bylaws may authorize a quorum of the board of directors to consist of no fewer than the greater of 1/3 of the number of directors in office or 2 directors.
(c) If a quorum is present when a vote is taken, the affirmative vote of a majority of directors present shall be the act of the board of directors unless a greater vote is required by the articles of incorporation or bylaws.
(d) A director who is present at a meeting of the board of directors when corporate action is taken shall be considered to have assented to the action taken unless one of the following applies:
(1) The director objects at the beginning of the meeting, or promptly upon arrival, to holding it or transacting at the meeting; or
(2) The director dissents or abstains from the action and:
(A) The dissent or abstention is entered in the minutes of the meeting; or
(B) The director delivers notice in the form of a record of the director’s dissent or abstention to the presiding officer of the meeting before its adjournment or to the corporation promptly after adjournment of the meeting.
(e) The right of dissent or abstention shall not be available to a director who votes in favor of the action taken.
This section is referenced in § 29-401.50, § 29-406.25, and § 29-406.53.
§ 29–406.25. Board and advisory committees.
(a) Unless this chapter, the articles of incorporation, or the bylaws provide otherwise, a board of directors may create one or more committees of the board that consist of one or more directors.
(b) Unless this chapter otherwise provides, the creation of a committee and appointment of directors to it shall be approved by the greater of:
(2) The number of directors required by the articles of incorporation or bylaws to take action under § 29-406.24.
(c) Sections 29-406.20 through 29-406.24 shall apply both to committees of the board and to their members.
(d) To the extent specified by the board of directors or in the articles of incorporation or bylaws, each committee may exercise the powers of the board of directors under § 29-406.01 except as limited by subsection (e) of this section.
(2) In the case of a membership corporation, approve or propose to members action that this chapter requires be approved by members;
(f) The creation of, delegation of authority to, or action by a committee shall not alone constitute compliance by a director with the standards of conduct described in § 29-406.30.
(g) The board of directors may appoint one or more directors as alternate members of any committee to replace any absent or disqualified member during the member’s absence or disqualification.
(h) A nonprofit corporation may create or authorize the creation of one or more advisory committees whose members need not be directors. An advisory committee shall not:
(1) Be a committee of the board; and
(2) Exercise any of the powers of the board.
§ 29–406.30. Standards of conduct for directors.
(2) In a manner the director reasonably believes to be in the best interests of the nonprofit corporation.
(c) In discharging board or committee duties a director shall disclose, or cause to be disclosed, to the other board or committee members information not already known by them but known by the director to be material to the discharge of their decision-making or oversight functions, except that disclosure is not required to the extent that the director reasonably believes that doing so would violate a duty imposed by law, a legally enforceable obligation of confidentiality, or a professional ethics rule.
(d) In discharging board or committee duties, a director who does not have knowledge that makes reliance unwarranted may rely on the performance by any of the persons specified in subsection (f)(1), (3), or (4) of this section to whom the board may have delegated, formally or informally by course of conduct, the authority or duty to perform one or more of the board’s functions that are delegable under applicable law.
(e) In discharging board or committee duties a director who does not have knowledge that makes reliance unwarranted may rely on information, opinions, reports, or statements, including financial statements and other financial data, prepared or presented by any of the persons specified in subsection (f) of this section.
(f) A director may rely, in accordance with subsection (d) or (e) of this section, on:
(1) One or more officers, employees, or volunteers of the nonprofit corporation whom the director reasonably believes to be reliable and competent in the functions performed or the information, opinions, reports, or statements provided;
(B) As to which the particular person merits confidence;
(3) A committee of the board of directors of which the director is not a member if the director reasonably believes the committee merits confidence; or
(4) In the case of a religious corporation, religious authorities and ministers, priests, rabbis, imams, or other persons whose positions or duties the director reasonably believes justify reliance and confidence and whom the director believes to be reliable and competent in the matters presented.
(g) A director shall not be a trustee with respect to the nonprofit corporation or with respect to any property held or administered by the corporation, including property that may be subject to restrictions imposed by the donor or transferor of the property.
This section is referenced in § 29-406.25 and § 29-406.33.
§ 29–406.31. Standards of liability for directors.
(a) A director shall not be 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 a director, unless the party asserting liability in a proceeding establishes that:
(A) Subsection (d) of this section or a provision in the articles of incorporation authorized by § 29-402.02(c);
(B) Satisfaction of the requirements in § 29-406.70 for validating a conflicting interest transaction; or
(C) Satisfaction of the requirements in § 29-406.80 for disclaiming a business opportunity; and
(ii) After a reasonable expectation to such effect has been established, the director has not established that the challenged conduct was reasonably believed by the director to be in the best interests of the corporation;
(D) A sustained failure of the director to devote attention to ongoing oversight of the activities and affairs of the corporation, or a failure to devote timely attention, by making, or causing to be made, appropriate inquiry, when particular facts and circumstances of significant concern materialize that would alert a reasonably attentive director to the need therefor; or
(E) Receipt of a financial benefit to which the director was not entitled or any other breach of the director’s duties to deal fairly with the corporation and its members that is actionable under applicable law.
(1) For money damages, also has the burden of establishing that:
(A) Harm to the nonprofit corporation or its members has been suffered; and
(2) For other money payment under a legal remedy, such as compensation for the unauthorized use of corporate assets, also has whatever persuasion burden may be called for to establish that the payment sought is appropriate in the circumstances; or
(3) For other money payment under an equitable remedy, such as profit recovery by or disgorgement to the corporation, also has whatever persuasion burden may be called for to establish that the equitable remedy sought is appropriate in the circumstances.
(c) Nothing contained in this section:
(1) In any instance where fairness is at issue, such as consideration of the fairness of a transaction to the nonprofit corporation under § 29-406.70(a)(3), alters the burden of proving the fact or lack of fairness otherwise applicable;
(2) Alters the fact or lack of liability of a director under another section of this chapter, such as the provisions governing the consequences of an unlawful distribution under § 29-406.33, a conflicting interest transaction under § 29-406.70, or taking advantage of a business opportunity under § 29-406.80; or
(3) Affects any rights to which the corporation or a director or member may be entitled under another statute of the District or the United States.
(d) Notwithstanding any other provision of this section, a director of a charitable corporation shall not be liable to the corporation or its members for money damages for any action taken, or any failure to take any action, as a director, except liability for:
(1) The amount of a financial benefit received by the director to which the director is not entitled;
(2) An intentional infliction of harm;
(3) A violation of § 29-406.33; or
(4) An intentional violation of criminal law.
This section is referenced in § 29-406.53.
§ 29–406.32. Loans to or guarantees for directors and officers.
(a) A nonprofit corporation shall not lend money to or guarantee the obligation of a director or officer of the corporation.
(1) An advance to pay reimbursable expenses reasonably expected to be incurred by a director or officer;
(2) An advance to pay premiums on life insurance if the advance is secured by the cash value of the policy;
(3) Advances pursuant to part E of this subchapter;
(4) Loans or advances pursuant to employee benefit plans;
(5) A loan secured by the principal residence of an officer; or
(6) A loan to pay relocation expenses of an officer.
(c) The fact that a loan or guarantee is made in violation of this section shall not affect the borrower’s liability on the loan.
This section is referenced in § 29-403.02.
§ 29–406.33. Directors’ liability for unlawful distributions.
This section is referenced in § 29-402.02 and § 29-406.31.
§ 29–406.40. Officers.
(a) The officers of a nonprofit corporation shall be the individuals who hold the offices described in its articles of incorporation or bylaws or are appointed or elected in accordance with the articles and bylaws or as authorized by the board of directors. At a minimum, a nonprofit corporation shall have 2 separate officers, one responsible for the management of the corporation, who may be referred to as the “President” or by any other term used in its articles of incorporation or bylaws and another responsible for the financial affairs of the corporation, who may be referred to as the “Treasurer”, or by any other term used in its articles of incorporation or bylaws.
(b) The articles of incorporation or bylaws or the board of directors shall assign to one of the officers responsibility for preparing or supervising the preparation of the minutes of the meetings of the board of directors and the members, if any, and for maintaining and authenticating the records of the corporation required to be kept under § 29-413.01(a) and (e).
(c) The same individual may simultaneously hold more than one office in a nonprofit corporation.
This section is referenced in § 29-401.02.
§ 29–406.41. Duties of officers.
Each officer has the authority and shall perform the duties set forth in the articles of incorporation or bylaws or, to the extent consistent with the articles and bylaws, the duties prescribed by the board of directors or by direction of an officer authorized by the board of directors to prescribe the duties of other officers.
§ 29–406.42. Standards of conduct for officers.
(a) An officer with discretionary authority shall discharge his or her duties under that authority:
(b) The duty of an officer shall include the obligation to inform:
(1) The superior officer to whom, or the board of directors or the committee thereof 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, or committee; and
(2) His or her superior officer, or another appropriate person within the nonprofit corporation, or the board of directors, or a committee thereof, of any actual or probable material violation of law involving the corporation or material breach of duty to the corporation by an officer, employee, or agent of the corporation, that the officer believes has occurred or is likely to occur.
(c) In discharging his or her duties, an officer who does not have knowledge that makes reliance unwarranted may rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:
(1) One or more officers or employees of the nonprofit corporation whom the officer reasonably believes to be reliable and competent in the functions performed or the information, opinions, reports, or statements provided;
(2) Legal counsel, public accountants, or other persons retained by the corporation as to matters involving skills or expertise the officer reasonably believes are matters:
(3) In the case of a religious corporation, religious authorities and ministers, priests, rabbis, imams, or other persons whose positions or duties the officer reasonably believes justify reliance and confidence and whom the officer believes to be reliable and competent in the matters presented.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720; Mar. 5, 2013, D.C. Law 19-210, § 2(d)(12), 59 DCR 13171.)
The 2013 amendment by D.C. Law 19-210 substituted “religious corporation” for “corporation engaged in a religious activity” in (c)(3).
§ 29–406.43. Resignation and removal of officers.
(a) An officer may resign at any time by delivering notice to the nonprofit corporation. A resignation shall be effective when the notice is delivered unless the notice specifies a later effective time. If a resignation is made effective at a later time and the board of directors or the appointing officer accepts the future effective time, the board or the appointing officer may designate a successor before the effective time if the board or the appointing officer provides that the successor does not take office until the effective time.
(b) Except as otherwise provided in the articles of incorporation or bylaws, an officer may be removed at any time with or without cause by:
(2) The officer who appointed the officer being removed, unless the board provides otherwise; or
(3) Any other officer authorized by the articles, the bylaws, or the board.
§ 29–406.44. Contract rights of officers.
(b) An officer’s removal shall not affect the officer’s contract rights, if any, with the nonprofit corporation. An officer’s resignation shall not affect the corporation’s contract rights, if any, with the officer.
§ 29–406.50. Definitions.
(1) “Corporation” includes any domestic or foreign predecessor entity of a nonprofit corporation in a merger, conversion, or domestication.
(2) “Director” or “officer” means an individual who is or was a director or officer, respectively, of a nonprofit corporation or who, while a director or officer of the corporation, is or was serving at the corporation’s request as a director, officer, partner, trustee, employee, or agent of another domestic or foreign corporation, partnership, joint venture, trust, employee benefit plan, or other entity. A director or officer shall be considered to be serving an employee benefit plan at the corporation’s request if the individual’s duties to the corporation also impose duties on, or otherwise involve services by, the individual to the plan or to participants in or beneficiaries of the plan. The term “director” includes a member of a designated body. The term “director” or “officer” includes, unless the context requires otherwise, the estate or personal representative of a director or officer.
(3) “Disinterested director” means a director who, at the time of a vote referred to in § 29-406.53(c) or a vote or selection referred to in § 29-406.55(b) or (c), is not:
(B) An individual having a familial, financial, professional, or employment relationship with the director whose indemnification or advance for expenses is the subject of the decision being made, which relationship would, in the circumstances, reasonably be expected to exert an influence on the director’s judgment when voting on the decision being made.
(4) “Expenses” include attorneys’ fees.
(5) “Liability” means the obligation to pay a judgment, settlement, penalty, fine, including an excise tax assessed with respect to an employee benefit plan, or reasonable expenses incurred with respect to a proceeding.
(6)(A) “Official capacity” means:
(7) “Party” means an individual who was, is, or is threatened to be made, a defendant or respondent in a proceeding.
(8) “Proceeding” includes a threatened, pending, or completed proceeding.
This section is referenced in § 29-402.02.
§ 29–406.51. Permissible indemnification.
(ii) In all other cases, that the individual’s conduct was at least not opposed to the best interests of the corporation; and
(2) The individual engaged in conduct for which broader indemnification has been made permissible or obligatory under a provision of the articles of incorporation, as authorized by § 29-402.02(b)(7).
(b) A director’s conduct with respect to an employee benefit plan for a purpose the director reasonably believed to be in the interests of the participants in and the beneficiaries of the plan is conduct that satisfies the requirement of subsection (a)(1)(B)(ii) of this section.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720; Mar. 5, 2013, D.C. Law 19-210, § 2(d)(13), 59 DCR 13171.)
This section is referenced in § 29-406.53, § 29-406.54, § 29-406.55, and § 29-406.58.
The 2013 amendment by D.C. Law 19-210 substituted “§ 29-402.02(b)(7)” for “§ 29-402.02(b)(8)” in (a)(2).
This section is referenced in § 29-406.53, § 29-406.54, and § 29-406.56.
(b) If the Superior Court determines that the director is entitled to indemnification under subsection (a)(1) of this section or to indemnification or advance for expenses under subsection (a)(2) of this section, it shall also order the nonprofit corporation to pay the director’s reasonable expenses incurred in connection with obtaining court-ordered indemnification or advance for expenses. If the court determines that the director is entitled to indemnification or advance for expenses under subsection (a)(3) of this section, it may also order the corporation to pay the director’s reasonable expenses to obtain court-ordered indemnification or advance for expenses.
This section is referenced in § 29-406.51, § 29-406.53, and § 29-406.56.
§ 29–406.55. Determination and authorization of indemnification.
(a) A nonprofit corporation shall not indemnify a director under § 29-406.51 unless authorized for a specific proceeding after a determination has been made that indemnification of the director is permissible because the director has met the relevant standard of conduct set forth in § 29-406.51.
This section is referenced in § 29-406.50, § 29-406.53, and § 29-406.58.
§ 29–406.56. Indemnification of officers.
This section is referenced in § 29-406.50.
§ 29–406.57. Insurance.
A nonprofit corporation may purchase insurance on behalf of an individual who is or was a director or officer of the corporation, or who, while a director or officer of the corporation, serves or served at the corporation’s request as a director, officer, partner, trustee, employee, or agent of another domestic or foreign corporation, partnership, joint venture, trust, employee benefit plan, or other entity, against liability asserted against or incurred by the individual in that capacity or arising from the individual’s status as a director or officer, whether or not the corporation would have power to indemnify or advance expenses to the individual against the same liability under this part.
§ 29–406.58. Variation of indemnification.
(a) A nonprofit corporation may, by a provision in its articles of incorporation or bylaws or in a resolution adopted or a contract approved by its board of directors or members, obligate itself in advance of the act or omission giving rise to a proceeding to provide indemnification as permitted by § 29-406.51 or advance funds to pay for or reimburse expenses as permitted by § 29-406.53. An obligatory provision satisfies the requirements for authorization referred to in §§ 29-406.53(c) and 29-406.55(c). Any such provision that obligates the corporation to provide indemnification to the fullest extent permitted by law shall obligate the corporation to advance funds to pay for or reimburse expenses in accordance with § 29-406.53 to the fullest extent permitted by law, unless the provision specifically provides otherwise.
(d) This part shall not limit a nonprofit corporation’s power to pay or reimburse expenses incurred by a director or an officer in connection with appearance as a witness in a proceeding at a time when the director or officer is not a party.
This section is referenced in § 29-406.54.
§ 29–406.70. Conflicting interest transactions; voidability.
(a) A contract or transaction between a nonprofit corporation and one or more of its members, directors, members of a designated body, or officers or between a nonprofit corporation and any other entity in which one or more of its directors, members of a designated body, or officers are directors or officers, hold a similar position, or have a financial interest, shall not be void or voidable solely for that reason, or solely because the member, director, member of a designated body, or officer is present at or participates in the meeting of the board of directors that authorizes the contract or transaction, or solely because his or their votes are counted for that purpose, if:
(1) The material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors and the board in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors even though the disinterested directors are less than a quorum;
(2) The material facts as to the relationship or interest of the member, director, or officer and as to the contract or transaction are disclosed or are known to the members entitled to vote thereon, if any, and the contract or transaction is specifically approved in good faith by vote of those members; or
(3) The contract or transaction is fair as to the corporation as of the time it is authorized, approved, or ratified by the board of directors or the members.
(c) This section shall be applicable except as otherwise restricted in the articles of incorporation or bylaws.
This section is referenced in § 29-404.40, § 29-406.31, and § 29-406.80.
§ 29–406.80. Business opportunities.
(a) The taking advantage, directly or indirectly, by a director of a business opportunity shall not be the subject of equitable relief, or give rise to an award of damages or other sanctions against the director, in a proceeding by or in the right of the nonprofit corporation on the ground that the opportunity should have first been offered to the corporation, if before becoming legally obligated or entitled respecting the opportunity the director brings it to the attention of the corporation and action by the members or the directors disclaiming the corporation’s interest in the opportunity is taken in compliance with the procedures set forth in § 29-406.70, as if the decision being made concerned a conflicting interest transaction.
(b) In any proceeding seeking equitable relief or other remedies, based upon an alleged improper taking advantage of a business opportunity by a director, the fact that the director did not employ the procedure described in subsection (a) of this section before taking advantage of the opportunity shall not support an inference that the opportunity should have been first presented to the nonprofit corporation or alter the burden of proof otherwise applicable to establish that the director breached a duty to the corporation in the circumstances.
(c) For the purposes of this section, the term “director” includes a member of a designated body.
This section is referenced in § 29-406.31.
§ 29–406.90. Immunity from civil liability for volunteer of corporation.
(a) For the purposes of this section, the term “volunteer” means an officer, director, trustee, or other person who performs services for the corporation and who does not receive compensation other than reimbursement of expenses for those services.
(c) This section shall apply only if the corporation maintains liability insurance with a limit of coverage of not less than $200,000 per individual claim and $500,000 per total claims that arise from the same occurrence. This subsection shall not apply to any corporation having annual total functional expenses, exclusive of grants and allocations, of less than $100,000, and which is exempt from federal taxation under section 501(c)(3) of the Internal Revenue Code of 1986.
(d) This section shall not exempt the corporation from liability for the conduct of the volunteer, but the corporation shall be liable only to the extent of the applicable limit of insurance coverage it maintains.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720; Mar. 5, 2013, D.C. Law 19-210, § 2(d)(14), 59 DCR 13171.)
The 2013 amendment by D.C. Law 19-210 substituted “1986” for “1954, August 26, 1954 (68A Stat. 163; 26 U.S.C. § 501(c)(3)” in (c); and substituted “shall not exempt” for “shall not be exempt” in (d).
§ 29–406.91. Limited liability for employee of corporation.
(a) For the purposes of this section, the term “employee” means a person regularly employed to perform a service for a salary or wages.
(b) Except as provided in subsections (c) and (d) of this section, an employee of the corporation shall not be held personally liable in damages for any acts or omissions in providing services or performing duties on behalf of the corporation in an amount greater than the amount of total compensation, other than reimbursement of expenses, received from the corporation for performing those services or duties during the 12 months immediately preceding the act or omission for which liability was imposed.
(c) The limitation of liability in this section shall not apply if the injury or damage was a result of:
(1) The willful misconduct of the employee;
(2) A crime, unless the employee had reasonable cause to believe that the act was lawful;
(3) A transaction that resulted in an improper personal benefit of money, property, or service to the employee;
(4) An act or omission that is not in good faith and is beyond the scope of authority of the corporation pursuant to this chapter or the articles of incorporation.
(d) The limitation of liability in this section does not apply to any licensed professional employee operating in his or her professional capacity.
(e) This section shall not exempt the corporation from liability, but the corporation is liable only to the extent of the applicable limit of insurance coverage it maintains.