Academy/Board Authority & Fiduciary Duties
Duty to act within authority
A board can only do what it has been given the power to do.
A board's authority comes from state law and the association's governing documents, and it stops where those documents stop. A decision made outside that scope, called acting ultra vires, gets no protection from the business judgment rule, no matter how reasonable it seemed, and a court or the membership can undo it.
Where the board's authority comes from
A board does not have authority just because its members were elected. The authority comes from two layers stacked on top of each other: the state's nonprofit corporation code, and the association's own declaration and bylaws. Both matter, and the board only has what those two sources actually grant it.
Corporate power also belongs to the board acting together, not to any one director or officer. Under a common statutory structure for nonprofit corporations:
"All corporate powers shall be exercised by or under the authority of the board of directors of the nonprofit corporation, and the activities and affairs of the corporation shall be managed by or under the direction, and subject to the oversight, of its board of directors."
Source: D.C. Code § 29-406.01, Council of the District of Columbia
That is why a single director, even the president, cannot bind the board on their own. Power sits with the board as a body, exercised through a vote, not with whoever happens to be holding the pen.
Where that authority runs out
Ordinary operating decisions belong to the board without a separate owner vote: adopting rules, setting the budget, hiring a manager, collecting assessments, and levying fines. That pattern shows up in Colorado's common-interest-community statute, which lists board powers along these lines. The exact list of what a board can decide alone varies by state and by your own governing documents, so check yours.
Structural decisions are different. Amending the declaration itself, or selling or encumbering common area, typically needs a supermajority of owners, not a board vote, under the statutes reviewed for this course. Some transfers of a limited use area require every affected owner to agree. The exact percentage, and whether a special assessment above a certain size also needs an owner vote, is set by your own declaration and bylaws, not by one nationwide rule. Read yours before assuming the board can act alone.
Board authority also has a ceiling even inside its own lane: a board is subordinate to the membership. A rule or motion the board adopts under broad "between meetings" authority in the bylaws can still be rescinded or amended later by a vote of the full membership.
Why exceeding authority forfeits legal protection
This is the part boards underestimate. A decision that falls outside the board's granted authority, sometimes called acting ultra vires, is not protected by the business judgment rule, even if every director acted in good faith and believed it was the right call.
"[The business judgment rule does not apply] to protect corporate actions that exceed the scope of the corporation or board's authority or that violate the organization's governing documents."
Source: The Business Judgment Rule and Common Interest Communities, Colorado Bar Association
Good faith and reasonableness are necessary, but they are not enough on their own. A well-meaning decision made outside the board's scope can still be challenged and unwound, and the directors who made it lose the deference courts otherwise give to informed, within-authority board judgment.
Check yourself
Answer before you read the explanation, recalling it is what makes it stick.
The board president signs a roofing contract after three directors text her their approval. No meeting was held. Is this valid board action?
The board wants to sell part of the common area parking lot to a developer. What is generally required beyond a board decision?
Last year the board adopted a rule under its general bylaw authority. This year, members vote at the annual meeting to rescind it. What happens?
Sources
- D.C. Code § 29-406.01, Council of the District of Columbia
- Robert's Rules of Order Newly Revised: Frequently Asked Questions, Robert's Rules Association
- Colo. Rev. Stat. § 38-33.3-302, Colorado General Assembly
- Colo. Rev. Stat. § 38-33.3-217, Colorado General Assembly
- Colo. Rev. Stat. § 38-33.3-312, Colorado General Assembly
- The Business Judgment Rule and Common Interest Communities, Colorado Bar Association
Related elsewhere in the Academy
Board Authority & Fiduciary Duties
Not sure which decisions your own board can make alone? Read what directors can decide without an owner vote next.
What counts as a board decision versus a decision requiring a membership vote, and the exact vote thresholds involved, vary by state statute and by your own declaration and bylaws.