Church Director Liability Under Arizona’s Business Judgment Rule

By February 5, 2020 Church
Church Director Liability Under Arizona’s Business Judgment Rule

Directors of churches are classified in Arizona law as directors of nonprofits. Arizona statutes provide a standard of conduct for such directors, along with protections for them. For purposes of director liability, whether the church has been incorporated or remained unincorporated is not taken into consideration. A church director will not be held liable for actions taken in accordance with their role under what is known as the “business judgment rule.”.

According to Arizona Revised Statutes 10-3830, a director is required to perform their duties in good faith. Directors are entitled to rely on information provided by a number of specialists within their organization or hired to perform duties for the church (such as external lawyers or CPAs). Under the statute, directors are also permitted to to act based on information provided by religious authorities such as “ministers, priests, rabbis,” so long as the director considers that person to be “reliable and competent in the matters presented.”

Where churches are concerned, the main effect of the business judgment rule in Arizona is that, so long as a director of a church is acting in a way that conforms to their duties, and relying on qualified authorities in their decision-making, liability will not fall on that director personally for acts undertaken during the proper performance of such duties.

And, further, courts presume that a director’s behavior has been in conformance with their duties.   The burden is on a person challenging the director’s conduct to prove by clear and convincing evidence that the director has behaved in a way that fell outside of their legal duties—either by acting or by failing to act when action was required of them.

Provident Law’s church and nonprofit attorneys are here to help in the case where a director or church is accused of wrongdoing. When a church or nonprofit organization in Arizona needs legal advice, we stand ready. We also counsel and serve charities, foundations, and other types of nonprofit organizations—providing broad transactional and general counsel services. Contact us to learn more.