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Pastor, Church & LawMember access only

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

Loans to Directors

§ 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.

Case study. A District of Columbia appeals court ruled that it was prohibited by the from resolving a lawsuit brought by members of a church claiming that the board of trustees breached its fiduciary duties by authorizing an interest-free loan to the pastor and by failing ...

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