We frequently talk about directors’ “fiduciary duties” to their associations and their members. While CCIOA seems to say that non-declarant directors do not have a fiduciary duty (it says no director nor officer shall be liable for actions taken or omissions made in performance of such person’s duties except for wanton and willful acts or omissions), Colorado courts continue to talk in terms of fiduciary duty. So what is a fiduciary duty?
It is the duty to act in good faith, in the best interests of the association, and with loyalty toward the association. Evaluating fiduciary duty is often done on a case by case basis, and depends on the facts in each case. However, there are certain things that every director should do to make sure he/she is carrying out his/her fiduciary duty. These include the following:
- Read and follow the associations governing documents – declaration, articles of incorporation, bylaws, rules, regulations, guidelines and policies;
- Be familiar with whether action can be taken outside of board meetings, and if so, how;
- Make sure all meetings, other than executive sessions, are open to all owners, and make sure the executive sessions are only conducted to address the issues allowed by CCIOA;
- Exercise business judgment when making decisions;
- Obtain advice and opinions of experts concerning matters that are beyond the general nature of the board’s knowledge;
- Maintain meeting minutes approved as to form and content;
- Obtain professional assistance when negotiating contracts;
- Act in accordance with contracts;
- Maintain copies of all contracts;
- Make sure the association has appropriate insurance;
- Make sure your management company has appropriate insurance;
- Maintain copies of all insurance policies;
- Require certificates of insurance directly from the vendors;
- Maintain financial records so as to comply with CCIOA;
- Meet with professionals who advise the board (insurance, CPA, attorney) at least annually;
- Diligently pursue collection of delinquent assessments using professionals who are trained and knowledgeable in the law concerning collections; and
- Provide annual education of association operations to the members.
This list is not intended to be exclusive, as there may be many other things a board should do to carry out its fiduciary duty. If you have questions, you should consult with the association’s legal counsel. One thing to remember is that the Colorado Revised Nonprofit Corporation Act exonerates directors and officers from liability if their decisions are made based on information, opinions, reports or statements prepared or presented by legal counsel, public accountants, or other persons that the directors or officers reasonably believe are within that person’s professional or expert competence.
So, do your best to carry out your appropriate duties, but if you have questions, you should engage and rely on the advice of competent professionals.