Board Liability: Understanding Joint & Several Liability

You Can Be Held Liable for Others' Mistakes

The concept of joint and several liability is one of the most critical principles in board work. If the board makes a negligent decision that leads to a loss, the injured party can claim the entire compensation amount from a single board member. It is then up to you to potentially claim money back from the others. Passivity is no defense either; your silence in the face of an indefensible decision is interpreted as acceptance.

Understanding this principle is crucial for protecting your personal finances.

Your Only Defense Is a Recorded Dissent

The law provides you with one powerful tool to protect yourself when you genuinely disagree with the majority. You have the right to demand that your opposition to a resolution, including a brief justification, is recorded in the minutes. This is called dissenting. Such a recorded dissent is your legal proof that you have acted diligently and warned against the decision. It will weigh very heavily in your favor in any subsequent liability case.

Without this proof, you are liable along with the rest of the board.

“Your silence in the face of an indefensible decision is interpreted as acceptance.”

Dissenting Is a Sign of Professionalism

It is crucial to know how to dissent in practice. In the meeting, you must clearly state your disagreement and ask for it to be recorded in the minutes with a short, precise reason. It is then your responsibility to check that this is correctly reflected in the draft minutes before you sign. Using this right is not a sign of disloyalty, but a sign of professionalism.

It shows that you take your personal responsibility seriously.

Want to learn more about how to navigate the legal and financial aspects of board service? Read our comprehensive guide to personal liability for board directors.