Avoiding Personal Liability for Higher Education Officers in the Post-COVID World-Fiduciary Duty Compliance in Times of Financial Distress

Lisa Lori will be a presenter at the Association of Independent Colleges and Universities of Pennsylvania’s AICUP Campus Leaders Forum 2021 on Thursday, June 24, 2021.

Higher education is at a crossroads. From declining enrollment and corresponding revenues to increasing costs and student drop-out rates, the headlines paint a bleak picture for higher education at least for the foreseeable future. Add the COVID-19 pandemic to the mix and higher education institutions now face the perfect storm for financial losses when the COVID dust settles. How institutions’ governing boards and officers respond to these challenges can affect not only the sustainability of the institutions themselves but also can potentially expose institutions’ officers (and directors) to significant personal liability if things go south. Therefore, it is critical that during this time of financial distress and transformation, officers (and governing boards) remain mindful of their fiduciary duties to ensure sustainability, and avoid deepening the insolvency, of their institutions.

Officers of higher education institutions owe fiduciary duties to the institutions they serve—i.e., duties of loyalty, prudence and good faith—to act in the best interest of the institution. This includes a duty to keep the institution’s operations sustainable and to adhere to the institution’s mission. While officers’ fiduciary duties extend to the institution itself, these duties can extend to creditors (companies to which the institutions owe money) if the institution becomes “insolvent.” If officers cause an institution’s insolvency to deepen to the point that creditors cannot be paid, officers may become personally liable for those debts, in certain circumstances.

This presentation will discuss:

(i) strategies to avoid personal liability for breaches of fiduciary duty;

(ii) corresponding legal requirements and considerations for fiduciary duty compliance;

(iii) implications of financial exigency, including pros and cons associated with declaring exigency, and avoiding exigency via mergers, joint ventures and other combination arrangements, and

(iv) recent trends that higher education institutions are employing to become or to maintain financial sustainability, and their implications.

Thursday, June 24, 2021
2:00 – 3:00 p.m.

Learn more and register.