The Board is also governed by the Corporation's Charter (Articles of Incorporation) and By-Laws.  In the event of a contradiction between the Act and the Corporation's Charter or By-Laws, the legislation always takes precedence.

Board members may be held responsible if they knowingly contravene corporation legislation, or any other relevant legislation, or mishandle finances to the extent that the organization cannot meet its financial obligations.  Board members may also be held responsible for contravention's of which they were unaware because of neglect.

Financial Obligations
Board members of a non-profit board are, of course, expected to act honestly, and in the best interests of the organization.  The finances of the organization should be managed by the board members in a responsible manner  to ensure that the organization as a whole will benefit.

Conflict of Interest
Each director needs to ensure that he/she will not gain personally as a result of his/her actions as a board member.  If an individual board member could profit personally from a decision made by the board, that member must declare a "conflict of interest" and withdraw from the decision-making process.

Fraud or Embezzlement
Obviously, board members who abuse access to the organization's funds and commit fraud or embezzle money are not meeting their financial obligations.  These are criminal acts and charges may be laid by the police.

Bankruptcy
Boards of directors are legally responsible to follow basic management principles.  These include:
    1)  setting up adequate controls requiring regular financial reports
    2)  establishing spending and fee collection policies
    3)  reviewing financial reports
    4)  seeking professional advice on legal or accounting issues.

Financial difficulties, even bankruptcy may still occur, however, individual board members will not be considered financially responsible if the above management principles have been followed.

Negligence
A board of directors might be considered negligent because it failed to consider available information, failed to set necessary policies or took action that was contradictory to available information.

Corporations Act
The Ontario Corporations Act and the Co-operative Corporations Act both state that boards of directors are legally responsible for carrying out and maintaining the incorporation process.

Meeting Legal Obligations
There are steps that Board members can take which will greatly reduce their liability:
     1)  Know the By-laws of the organization
     2)  Attend meetings regularly
     3)  Disclose any possible financial interests
     4)  Retain professional legal and accounting counsel
     5)  Review all reports and correspondence

Indemnification
Under the Ontario Corporations Act incorporated organizations are allowed to protect individual board members from personal liability while carrying out their responsibilities.  This must be agreed to by the members of the organization and included in the By-laws.  Indemnification clauses are not valid if the board member is guilty of deliberate neglect or criminal actions.  The organization must cover the costs of protecting board members, so indemnification is limited by the organization's ability to pay.

Board of Directors Liability Insurance
Board of Directors Liability Insurance is available to better protect both individual members and the corporation itself. This type of insurance would cover the costs of indemnification if legal action were taken against one of the board members.  The costs of such coverage, however, may be prohibitive.  Further information may be obtained from:
              Companies Branch,
              Ministry of Consumer & Commercial Relations,
             393 University Avenue, 2nd Floor, Toronto, Ontario  M7A 2H6

Sources:  Not-For-Profit Incorporator's Handbook
           Publications Ontario                          Child Care Management Guide
           50 Grosvenor Street                         OCBCC
           Toronto, Ontario M7A 1N8             297 St. George Street, Toronto, Ontario  M5R 2P8
           telephone:1-800-668-9938 

Disclaimer - Information Sheets
This Ontario Federation Information Sheet was prepared and approved by the Board of Directors of the Ontario Square and Round Dance Federation.  It is intended only as a guide and for the  assistance for dancers and club executives.  The information was considered correct at the time of publication.  Suggestions or changes are welcomed by the Federation and should be sent to the Secretary.  This Information Sheet is made available by the Federation to members and other interested parties on the clear understanding that neither the Federation, its Board of Directors, or its staff can be held responsible for the consequences arising from the use of this information.