You can sue a non-profit organization

About unfaithful board members and how to deal with them properly

The assumption of board positions in non-profit associations (and foundations) is an important part of the large overall voluntary commitment in Germany. Such a position usually goes hand in hand with a relatively large amount of power over the organization's funds - and with it a lot of responsibility. Black sheep occasionally use their power to their own advantage.

What to do if there is a suspected abuse of power?

Any suspicions against board members or other board members should - for the good of the organization - be investigated immediately, initially also in the form of a personal conversation with the person concerned. It is not uncommon for the suspicion to be dispelled in this way. However, if the suspicion that a board member has committed a serious breach of its duties is substantiated, this justifies an immediate dismissal from office. In the case of association boards authorized to represent, a change should also be entered quickly in the association register so that the previous office holder can no longer represent the association in legal transactions. In the case of salaried board members, for example, suspicion of infidelity can justify an extraordinary termination. The board of directors is then usually blocked from all access to e-mail boxes and bank accounts - an important security measure.

Examine and enforce claims for damages against former board members

If a new board of directors is elected, it has to reclaim assets and money from the predecessors that were used for purposes other than those for which they were intended. In addition to criminal law consequences, the improper use of the assets of the NPO can also be used for Loss of charitable status to lead. Affected NPOs must therefore ensure that the lost assets flow back to them. For this reason alone, non-profit organizations will usually have no choice but to sue their (former) board members for damages and, if necessary, to report them.

A discharge of the board of directors granted in previous years does not prevent the claim by the way. The discharge (as a waiver of any claims against the board members) is only effective if the general meeting was aware of all the facts that could lead to such claims - the members should therefore have suspected at the time of discharge that individual board members were misappropriating funds. As a rule, however, this will not have been clear to the members.

Prevention in advance through suitable compliance measures

Ideally, you should reach into the cash register of an NPO or other misconduct in the office through suitable internal Compliance measures excluded from the outset or at least discovered quickly before the problems get bigger. A compliance management system tailored to the NPO should ensure precisely this. A first measure could be that transactions above a certain minimum amount always require the approval of two boards of directors or other bodies - or even the general assembly.

The difference between embezzlement and embezzlement is usually only of legal significance. It is clear, however, that the consumption of third-party funds for private purposes can be punishable by law. Management boards (regardless of their organization) are therefore well advised to only use the assets entrusted to them appropriately and to clearly separate them from their own money. Incidentally, reaching into the club's coffers "on loan" without an approving resolution is also a criminal offense. NPOs should take appropriate organizational measures to prevent the misappropriation or to be able to detect it as quickly as possible. Our experienced lawyers will be happy to help you with this.

Continue reading:
Extraordinary termination of a foundation board member due to suspicion of breach of trust
Loss of Charity: Follow-Up Problems

Stefan Winheller

Lawyer Stefan Winheller specializes in the law of nonprofit organizations. He advises and represents non-profit associations, business and professional associations, non-profit limited liability companies and cooperatives as well as foundations and other non-profit organizations, especially religious corporations.

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