Cal. Corp. Code §5231
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Director duties and liabilities — Standard of care
Codifies the fiduciary standard of care for directors of California nonprofit public benefit corporations. Although §5231 is the public benefit corporation section, identical or near-identical duties apply to nonprofit mutual benefit corporation directors under Corp Code §7231 — the form most CA HOAs take. Directors must perform their duties in good faith, in a manner believed to be in the best interests of the corporation, and with the care of an ordinarily prudent person under similar circumstances (the corporate "business judgment rule" baseline).
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Governance
| Ref | Requirement |
|---|---|
| (a) | Every HOA director must (1) act in good faith, (2) act in what they reasonably believe is the HOA's best interest, and (3) exercise the care of an ordinarily prudent person — including reasonable investigation before acting. These three duties combine to form the standard of care. |
| (b) | Directors are not personally liable for relying in good faith on their management company's reports, their CPA's audit, or their attorney's advice — provided they reasonably believed the source was competent to provide that information. |
| (b) | If a director KNOWS their CPA is incompetent, or KNOWS the management company is misrepresenting the books, they cannot hide behind reliance. The protection requires good faith — not willful blindness. |
| (c) | Directors who follow the §5231 process — good faith, best-interest belief, reasonable inquiry — are immune from personal liability for the decision itself, even if the outcome is bad. The business judgment rule protects HOA directors from second-guessing of their judgment calls. |
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Legal references last verified May 24, 2026.
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