Asset protection for leaders of non profit organisations

A paper presented to the Christian Management Australia Conference June 2008

It's fair to say that the liability of leaders of non-profits has, particularly since the 1990's, been trending upwards. Even for corporate bodies, which traditionally have been viewed as "safer options" for leaders and members, the corporate veil has gradually been lifted by courts. Courts are becoming more adventuristic in finding ways to make leaders of corporate entities responsible for the debts of the corporate entities, and to seek to look through asset protection structures.

Leading a non-profit organisation has many pressures, and it seems somewhat unfair that leaders who devote themselves to managing and guiding a non-profit organisation should have to be concerned about personal liability.

This is particularly the case when you are providing your time and services "free of charge" or for a salary well below market expectations.

Unfortunately, however, creditors, the Trustee in Bankruptcy and the Courts will not place much weight, if any, on your honorable intentions. Ultimately, when there is a liability or debt to be paid, the creditor will seek to utilise all measures at their disposal in order to satisfy the liability or debt. If that means attacking the personal assets of the leaders of the non-profit organisation, then so be it.

That's little comfort when litigation against you has commenced, proceedings have been served, and your personal home is now at risk. Litigation is stressful enough without also having to worry about losing your personal assets and home. However at this stage, it's too late to be thinking about "asset protection". The time for thinking about it is now, when there is no possible claim or litigation on the horizon.

For that reason it is timely to consider, if you are a leader of a non-profit entity, what protections are in place for your personal assets, and to further consider whether additional measures need to be put in place to properly protect those personal assets.

At the outset, we want to stress that this is a very general overview of the law and strategies for asset protection. We won't be delving into complex company and trust structures today. It is not possible to provide a thorough treatment of all the strategies that might be implemented, many of which will depend on the individual's own circumstances. Therefore, we recommend that you take legal advice regarding the options best suited to your circumstances. Taking that advice sooner, rather than later (when it might be too late), is crucial.

WHAT ARE THE RISKS FOR LEADERS OF NON-PROFIT ORGANISATIONS?

Before considering what steps should be taken to protect your personal assets, it's worthwhile to first consider the risks. A consideration of these risks will help you to decide if further steps to protect your personal assets are actually necessary.

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