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Pastor, Church & Law

written by Richard R. Hammar, J.D., LL.M., CPA

Loans to Directors

Volume 2 . Chapter 6 . § 6-07.10
Key point 6-07.10. Church board members may be personally liable, under state nonprofit corporation law, for loans they authorize for any officer or director of the church.

The Model Nonprofit Corporations Act, as well as various other laws under which some churches are incorporated, prohibit the board from making loans (out of corporate funds) to other directors or officers. Directors who vote in favor of such loans can be liable for them in the event that the loan is unauthorized or otherwise impermissible. Church boards must check the state law under which they are incorporated before considering any loans to a minister. View Table 6-3 Selected State Laws Prohibiting Loans to Directors by Nonprofit Corporations.

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