HBA-ATS H.B. 2217 76(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 2217
By: Hilbert
Civil Practices
4/26/1999
Introduced



BACKGROUND AND PURPOSE 

Unlike for-profit corporations, nonprofit corporations are incorporated to
accomplish a social mission.  In Texas, nonprofit corporations seek to
improve the quality of life in Texas through job creation, community
development, economic activity, and education.  To achieve their missions,
nonprofit  corporations mobilize volunteer officers to serve as the key
personnel in control of the corporation.  Because a nonprofit corporation
is considered a distinct legal entity, officers are usually shielded from
most liability for the corporation's actions.  Nonetheless, an officer
sometimes can be liable for the decisions made by that officer while
serving as an officer.  Although the Texas NonProfit Corporation Act limits
the liability of volunteer directors with respect to acts and omissions
performed within the scope of their duties, the possibility of liability
for some types of actions may deter potential volunteers.  According to a
1997 study by the Gallup Organization on "The Liability Crisis and the Use
of Volunteers by Nonprofit Associations," more time would be volunteered if
individuals felt that they were sheltered from potential lawsuits. 

H.B. 2217 provides that an officer of a nonprofit corporation is not liable
to the corporation or any other person for an action taken or omission made
by the officer in that capacity unless the officer's conduct was not
exercised in good faith, with ordinary care, and in a manner the officer
reasonably believes to be in the best interest of the corporation.  

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Article 1396-1.01 et seq., V.T.C.S. (Texas Non-Profit
Corporation Act), by adding Section 2.22, to provide that an officer of a
nonprofit corporation is not liable to the corporation or any other person
for an action taken or omission made by the officer in that capacity unless
the officer's conduct was not exercised in good faith, with ordinary care,
and in a manner the officer reasonably believes to be in the best interest
of the corporation.  

SECTION 2.Effective date: September 1, 1999.
  Makes application of this Act prospective.

SECTION 3.Emergency clause.