Assignment 2: Write a paper explaining how “directors and officers of not-for-profit organizations can be held personally liable for "wrongful acts."

a not-for-profit organization incorporated under the Society Act of British Columbia

“When a society is incorporated, it acquires all of the powers of an individual, as well as an independent existence -- separate and distinct from its members -- and an unlimited life expectancy.”1

Is this a Public Transit Friendly™ Appointment Time? (YES/NO)
Is this a Public Transit Friendly™  Event/Activity? (YES/NO)
from a promotion of the Public Transit Hosts Program

[1]Corporate Registry  - Societies


Using the KAMLOOPS PUBLIC TRANSIT HOST PROGRAM (KPT HOST) see addendum, I will describe how “directors and officers of this not-for-profit organization can be held personally liable for "wrongful acts” and what those liabilities would include.
In the Conclusion of this paper, I will explain what the “Transit-HOST” program can do to protect itself, its directors and its members from those liabilities and risks and possible negligence claims in this risky environment.

I have included the following points in this discussion:
1.    The roles and responsibilities of
a.    Board of Directors (BoD) and
b.    its members
2.    The personal liability of each KPT HOST volunteer
3.    Supervision of KPT HOST employed staff

NOTE: Social and/or Commercial host liability (we will be dealing with alcohol related issues with our transit ridership/guest and in our fund raising efforts in the community).  

Drinking and driving laws have changed radically in BC, recently, and many business involved with serving alcohol are stating publicly they are now losing business.  As primary part of the KPT HOST Program, we will be encouraging all establishments serving alcohol to promote our Customized Public Transit Kits to their drinking patrons as an alternative to expensive cab fares, ‘Red Nose’ driving services, and designated driver programs.

These unique kits will contain bus coupons/tickets, individualized route maps and schedules from and to their patrons exact home address including the bus stop locations, bus numbers and timings. Each kit would be updated in real time by having the drinking
institution call the HOST Centre for details and provide it to each drinking patron with frequent reminders of ‘last calls for the bus’ departing for their home locations.  

The “Going Home” kits would be provided free of charge to each patron or couple by the Food/Drinking provider and the KPT HOSTS would bill the provider for each serialize kit used. The patron or couple planning an outing would call the KPT Host Call Centre for exact bus times and locations “Going To” their selected participating establishment or alternately discuss it with the easily identifiable ‘ON BUS HOST’ Volunteer/staff member riding each bus. A valued added service for the Host program would be recommending establishments and making reservations for a fee to those ‘Public Transit Friendly’ establishments.

Standard Operating Procedures (SOP)
(with  A Rock Solid Business Plan) is paramount

By understanding the respective roles of directors, members, staff and volunteers will help us foresee where things could go wrong and then assist us in fashioning, implementing and enforcing sensible standard operating procedures for each level of the organization including the boards own operations and procedures.

As the final responsibility rests with the board of directors in all cases, the SOP makes it easier for the BoD themselves to recruit, require and encourage staff and volunteers to follow authorized procedures.

Risk Management
The SOP is used as a ‘meeting by meeting’ checklist (Inness, 1993, p 46) for the BoD decision making, a performance schematic that will help to simplify the regular inspections of the activities of each level of the services provided KTP HOST Program.

The BoD can then exercise constant vigilance, anticipate problems, make adjustment as needed and proactively seek advice from professionals (lawyers, accountants, social engineers) and the opinion of the public. In addition to the board obtaining their own
expert opinions, it is imperative that to further reducing their risks the directors should ensure that their administrators, managers and staff get all the help they need by providing access (and all necessary funding) to accountants, to ‘Human Rights’  and/or ‘Harassment’ specialists and to legal counsel. Some of our KPT Host are going to be subjected to “bullying in the workplace” and assault by the intoxicated or aggressive transit riders/guests and the BoD needs to be aware of each incidence.

A Final Introductory Note: Obtain insurance (just in case)! Our KPT HOSTS are involved in the recommendation of activities (especially out of doors ), shows and events in our community, We need to be aware the possible threats to the guests to and from these events.
“Liability may arise if a guest is mugged returning from a show that was recommended by a staff member who knew, or ought to have known, that walking back from the theatre at night would pose a threat, and did not warn the guest to take a taxis.” (Longchamps, D.,  & Wright, B. H., 2007 p. 138)
Many of our Performance Art events in Kamloops are not completely ‘Public Transit Friendly Events’.

1 a. The roles and responsibilities of Board of Directors(BoD)

The primary and legal source of information for the part that the Board of Directors must play in our Organization is listed in the Society Act of British Columbia Part 3 — Directors.

Depending on the bylaws, Directors may be
  • nominated and elected by vote of its members or be
  • appointed

and there must be at least 3, one ordinarily residing in BC)
  • They must manage the affairs or supervise the management of the society and they have all authority and responsibility to do so.

Quoting from the Societies Act, each director
“...must act honestly and in good faith and in the best interests of the society, and exercise the care, diligence and skill of a reasonably prudent person”
These are commonly called their fiduciary duties[*]

The societies act Part 3 — Directors -- section 26 clearly states that there are No exceptions from statutory duties:
“26  Nothing in a contract, the constitution or the bylaws, or the circumstances of a director's appointment, relieves a director
(a) from the duty to act in accordance with this Act and the regulations, or
(b) from a liability that by a rule of law would otherwise attach to the director in respect of negligence, default, breach of duty or breach of trust of which the director may be guilty in relation to the society.
1 b. Liability of Regular Members

Under the Societies Act, it states:
“5  A member of a society is not, in the member's individual capacity, liable for a debt or liability of the society.[8]
By that article in our charter we members escape the liability but we do owe collectively a responsibility to this Society and to the members who serve as officers. Our directors have so much responsibility. Unpaid but for their expenses, they face ever increasing threats of liability. You have to wonder why do they do it?

We, the founding and future members of this Society, must do our utmost to inform and assist our nominees for directorship in their understanding of this before we vote them in as our directors. As one article states:
“tens of thousands of individuals serve as unpaid directors and officers of such corporations and perform a vital social function in so doing; yet, it is unlikely that more than a small fraction of these individuals have any clear idea of the risks that they are undertaking by accepting such positions”[9]

2. Personal Liability of each ‘KPT HOST’ volunteer

Every citizen of our Canadian has a duty under common law to take reasonable care not to injury someone else with our behaviour.
“This means that a person cannot do anything without thinking about the consequences of their actions. If they don’t take this reasonable care, they can be held liable for the damage they cause.”[10]

While there is no one specific legal statute that covers our KPT Host volunteers, there are many statutes that apply to the activities of volunteers or voluntary organizations in Canada and, for our particular needs, in British Columbia.
Those same fiduciary duties that apply to our Board of Directors also apply to our volunteer ‘STAFF’, to
“...act honestly and in good faith and in the best interests of the society, and exercise the care, diligence and skill of a reasonably prudent person....”
One very important thing to note about our volunteers’ liability, our organization deals particularly and extensively with 3  main subgroups of ridership on the public transit system, in addition to tourist and possibly intoxicated individuals sent to us from our ‘bar program’. They are
  • Child
  • Seniors, and
  • Handicapped

It is these three subgroups that we must take additional care under Government Statues. In dealing with them, it is here that we are going have to be very careful and continuously reinforce of our duties of care to an exacting “professional caregivers” level. (Longchamps, Write, 2007, p. 138).

I would like to cite one important example with respect to children, that comes under B.C. provincial legislation to illustrate what I mean,
“any person who has reasonable grounds for believing that a child is or may be in need of protection is required to forthwith report the belief (and the information upon which its based) to a Children’s Aid Society or other appropriate organization.” (The Child, Family and Community Service Act,  2010)
We can see how this sets out special services (and increased liability) to children and their families, that
“ ... when caring for children, the level of care required is that of a careful parent or guardian” and “...having taken responsibility for the care and supervision of children, volunteers have a duty to continue caring for them until they are safely in the care of another person.” (Volunteers and the law, 2000, p. 22)

The  BoD, its volunteers, and staff must continually train and reinforce that level of care for this brings up the subject of Vicarious Liability. If the BoD do not undertake these educational and training programs and a volunteer is sued for harm caused by his or her actions, the KPT HOST Program may become liable through the legal principle of vicarious liability.
“Vicarious liability is when the law holds one person or organization responsible for the misconduct of another because of the relationship between them, even if the person held liable did not participate in or agree to the wrongful act.”(Volunteers and the Law, 2000, p.63)

The Board of Directors most certainly are going to be held accountable for the acts of our volunteer HOSTS.

You can see that the number one Duty of our BoD is to see that the  HOST volunteers take more than  “reasonable care” in everything they do.

3. Supervision of KPT HOST employed staff
At this formative stage of our KPT HOST organizational development, our next big step is  the hiring of an Executive Director (General Manger) who will be the main and first person employed. (S)he will oversee operations and management and implement the policy decisions (SOP) of the Board of Directors.

One of the very first duties of this primary staff member is to develop a full and complete printed hand book of legal information about the liabilities and duties that arise from our organization’s divergence and particular activities. It must be reviewed item by item with the board, reinforce with each member and signed off by them.

There are two ways to limit the personal liability of our directors:
  • directors indemnification, and
  • directors and officers liability insurance.

We must place indemnification (pay back their costs if sued or if a settlement is needed, in those situations were we can) in our by-laws and cover the directors with Directors and Officers (D&O) liability insurance, for those who may be sued for negligently (or who we, the Kamloops Public Transit Host Program, may sue) managing the society’s affairs.

As you can see from the discussions in this paper, the Directors’ liability is an increasing concern for this fledgling organization,
“ the personal liability of directors has increased,  as historical shields have eroded, lawsuits naming directors have increased, and new statutes have imposed personal liability on directors and officers ...”(Volunteers and the Law,2002, p.63)

We certainly need to address these liability issues aggressively right from the very beginning if we are  going to attract the necessary financial sponsors, the government agencies, and the qualified directors who must run the society.

The following check list is excellent advice for our future staff members from the Booklet “Volunteers and the LAW” (2000), produced by The Law Foundation of British Columbia.

Obtain a written understanding of your duties.
If you are asked to do any tasks outside of your list of responsibilities, be certain that the request is coming from the person in authority.
Record any changes to your duties.Ask for assistance if you are not sure of a policy or procedure.
Be aware of policies and procedures regarding your duties.Refuse to proceed with an activity that you feel may be unsafe or for which you feel there may be insufficient supervision.
Know your direct supervisor and be aware of the person with authority you can go to if you have a concern.Act upon requests from the board to fulfill the organization’s duty to maintain its legal status, or advise the board if you are unable to do so.

“Make sure you know your responsibilities as staff and be aware of your rights and responsibilities as an employee under the Employment Standards Act, or our collective agreement.”

Addendum                                                           back to top
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At this point, just a idea in the mind of Alfred Penny et al.

This society’s primary purpose is to provide specially trained volunteer HOSTS to ride the public transit buses of Kamloops as a second person[14]
1.    as a support to the regular bus drivers and
2.    provide an information and security presents at the main transit exchanges
3.     in preform important add-on community and tourist services.

These PUBLIC TRANSIT HOSTS would assist
●     handicapped persons (mentally and physically) to feel more secure (a friendly face and attention) The primary task of the bus driver is to drive the bus safely and on time.

●     assist caregivers of the above persons to feel more secure that they can board handicapped person at the closest bus stop to their home, and working together with a HOST PERSON assist at the transfer centres transfer to a new bus or safely drop them off at their intended activity and see that they are picked up again. (Not intended to replace the HandiDART system or Taxis Saver Program)

●     This could apply to children as well, with the parents and hosts working together to ensure the safe transfer to and from schools and other after school activities.

●     guide new riders on how to use the bus more effectively

●     encourage more ridership, providing bus passes (for commission fees),

●     Assist the drivers with unruly passengers (a second set of eyes behind the back of the driver) and with special training, handle the sometimes intoxicated patrons of the bars. This could be a major assistant because of the EXPANDED LIABILITY FOR COMMERCIAL HOSTS

●     Provide a buffer between two of the main rider-ships - loud boisterous students and easily intimidated seniors.

●     guide people to ‘public transit friendly events

●     encourage all event holders to plan for ‘public friendly events’

●     Encourage the city and transit contractor to plan schedules that would include more Public Transit Friendly Events - increasing ridership. (an prime example would be to schedule the bus to arrive before regularly scheduled play opening times. With the present 2010/2011 schedules the bus arrives 5 minutes after the performance begins and the last bus to the area’s only bus stop leaves 1/2 hour before the play ends, utterly useless to bus riding patrons)

●     Assist tourists in riding the local bus to and from places and events from their accommodations. (Provide guided mini tours)


Internet Sources and other Research Material used in this paper
Employment Standards Act
[includes amendments up to B.C. Reg. 131/2010, June 4, 2010]
© Queen's Printer, Victoria, British Columbia, Canada

Ministry of Citizens’ Services
Government of British Columbia
Corporate Registry - Societies

Risk Management Counsel of Canada
“When those Bullies go BerserK”
Liability Issues arising from the use of
Excessive Force by Employees of Licenced Premises
Dean Lawton of Carfra & Lawton
Victoria, British Columbia

Liquor Control and Licensing Act
[includes amendments up to B.C. Reg. 43/2010, April 1, 2010]
© Queen's Printer, Victoria, British Columbia, Canada

This Act is Current to October 27, 2010
[RSBC 1996] CHAPTER 433
© Queen's Printer, Victoria, British Columbia, Canada

This Act is Current to October 20, 2010
[RSBC 1996] CHAPTER 337
© Queen's Printer, Victoria, British Columbia, Canada

Berezowsky, S., & McDonnell, P (2009)
©  2009 Singleton Urquhart LLP

Fraser Milner Casgrain LLP (FMC)

FIPG Risk Management Manual
Produced by FIPG, Inc., a risk management association of men’s and women’s
Updated December 2003.

Canada Safety Council
Bullying in the Workplace
©2010 Canada Safety Council. All Rights Reserved.

This Act is Current to October 27, 2010
© Queen's Printer, Victoria, British Columbia, Canada

Lipson, C. (2004).Doing Honest Work in College:How to prepare citations, avoid plagiarism, and achieve real academic success. Chicago, IL: The University of Chicago Press.

Rackham, M. (2003). The Basic Cozy Punctuation Course. Campbell River, BC: Splashes From The River Multimedia Entertainment Inc.

[1]Longchamps, D.,  & Wright, B. H., (2007) Canadian Hospitality Law: Liabilities and Risk (3rd Ed.), Toronto, On.:Nelson Education Ltd.

Human rights in the Hospitality Industry p. 35
Chapter 5:
Insurance p. 57
Managing risk p. 58
Insurance options p. 59
For volunteers p. 59
For organizations p. 60
For boards and directors p. 63

©2003 the Canadian Tourism Commission
This Act is Current to October 27, 2010
[RSBC 1996] CHAPTER 433
© Queen's Printer, Victoria, British Columbia, Canada
[6]Longchamps, D.,  & Wright, B. H., (2007) Canadian Hospitality Law: Liabilities and Risk (3rd Ed.), Toronto, On.:Nelson Education Ltd. p.41

This Act is Current to October 27, 2010
[RSBC 1996] CHAPTER 433
© Queen's Printer, Victoria, British Columbia, Canada

Innes, W.  (September 25, 2008).  New Developments and Selected Issues in the Liability of Directors and Officers of Charitable and Non-Profit Corporations.  Toronto: Fraser Milner Casgrain LLP p. 15


Volunteers and the Law
Third Edition
p. 11
p. 37
p. 42
p. 25  Providing services to seniors and people with disabilities.
© 2000 the People’s Law School

* “A fiduciary relationship exists when one person, the fiduciary, has the power to affect another person’s property or legal interests such that the other person is vulnerable to the power of the fiduciary.”

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