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In our previous post, we discussed how boards can jeopardize the confidentiality of their communications by using email to communicate with one another. And, by jeopardizing confidentiality, boards also jeopardize their ability to receive privileged legal advice from their attorneys.

As if that weren't bad enough, if your board uses email to communicate and there is an inquiry from a government body or a lawsuit, you and your board members may have exposed yourselves to significant personal liability. Once a subpoena gets issued in an investigation or lawsuit or legal discovery commences, the entity being subpoenaed or that is subject to discovery becomes a "custodian" of relevant documents on behalf of the court with jurisdiction in the matter. The custodian is responsible for identifying, preserving and handing over to the court any and all documents relevant to the discovery process or subpoena.

Typically, when a company is investigated or sued the company is the custodian and is responsible for turning over relevant documents to the court. The company is typically the custodian because the company typically has control of the relevant documents in question. However, in the case of board members, if a board member uses their email address from a different company, or a personal email address, then the individual board member will likely be names as a custodian alongside the company itself.

Circling back to the fictional example from our last post, Bob, board member at Wayne Enterprises and managing director at Gotham National Bank (GNB) uses his GNB email to conduct Wayne Enterprises board related business. Once an investigation starts into misappropriation of resources and misrepresentation in the accounting at Wayne Enterprises due to company resources being diverted in order to secretly fund a masked vigilante, then Bob will very likely be named personally as a custodian of records in that investigation due to his using his GNB email address.

Once Bob is named as a custodian, Bob is personally responsible for turning over the relevant documents to the court in a timely fashion. If Bob won't or can't do that, Bob can be subject to significant penalties including criminal penalties. If GNB has a policy that it will not turn over emails unless GNB itself is subpoenaed (which it has not been in our example because the Wayne Enterprises investigation has nothing to do with GNB) then it is up to Bob to figure out how to convince GNB otherwise or else the court can hold Bob responsible.

For you and your board members, keeping your board communications off of email is the best way to avoid opening yourselves up to this source of potentially very severe personal liability. And even though your company is probably not run by a masked superhero (though if it is, please let us know as that would be awesome) real people find themselves in this kind of sticky situation all the time. Companies get investigated and sued for all kinds of reasons, some of them merited and some of them frivolous, all the time. And whether the investigation or lawsuit has a reasonable basis or not, there can be discovery and/or subpoenas regardless. So even if there is no good reason in the first place, if you or your board members are named a custodian, you are subject to potentially severe personal liability.

The way to avoid getting caught between a rock and a hard place in this area is to use iBoardrooms. iBoardrooms provides a secure messaging tool to let you and communicate with your board without using email and with all of the records staying with your company. That way in any investigation or lawsuit your company, and not you or any of your board members personally, will be named as the custodian of those records. iBoardrooms is a board portal that gives you the tools to run great board meetings. Great board meetings are meetings where your board can really focus on the key strategic issues that drive success for your organization. iBoardrooms lets your board keep the focus on strategy, without needing to be distracted by scary personal liability issues like being a custodian of documents or by administrative trivia. Give us a try free for thirty days.

Apr 13, 2016 7:41 am EDT