Recent Developments

Issues that affect ministers and churches
Officers, Directors, and Trustees - Part 2
A federal court in Indiana ruled that the directors of a church subsidiary could be sued individually for financial losses incurred by investors.
Key point 6-07.03. Church board members have a fiduciary duty to use reasonable care in the discharge of their duties, and they may be personally liable for damages resulting from their failure to do so.
Key point 6-07.06. Federal and state securities laws make board members personally liable for acts of fraud committed by an organization in connection with the offer or sale of securities. These laws apply to churches, and as a result church board members may be liable for fraudulent practices occurring in connection with the offer or sale of church securities.
Church Officers, Directors, and Trustees

* A federal court in Indiana ruled that the directors of a church subsidiary could be sued individually for financial losses incurred by investors in a securities scam on the basis of their breach of their fiduciary duty of care. A denomination created a subsidiary organization (the Loan Fund) in the 1920s to raise funds for denominational programs and to provide loans to affiliated churches. From 1996 to 2002 the Loan Fund raised millions of dollars by selling investment notes, mostly to church members. The notes were sold in connection with "offering circulars" containing detailed information about the Loan Fund and its finances and operations. The offering circulars informed investors that the funds from these notes would be used primarily to make interest-bearing loans to local churches. In 2002, the Loan Fund owed approximately $85 million to noteholders.

Log In For Full Access

Interested in becoming a member? Learn more.

Posted: July 1, 2005
View All
from our store
Church Fundraising Campaigns

Church Fundraising Campaigns

Discover tips on raising and borrowing money.
Essential Guide to Liabilities and Duties for Church Boards

Essential Guide to Liabilities and Duties for Church Boards

Be aware of ways you can expose yourself to personal legal liability.
The 4 Hour Legal Training Program for Church Boards

The 4 Hour Legal Training Program for Church Boards

Understand key legal concepts necessary to protect the board and the church.
Essential Guide to Money for Church Boards

Essential Guide to Money for Church Boards

Church board members should have a basic understanding of these financial issues.

ChurchSalary

ChurchSalary

Let ChurchSalary do the work. Get personalized compensation reports for staff and pastors.