Some Unique, Factual Things About Nonprofits
SOME UNIQUE FACTUAL, LEGAL, CULTURAL AND POLITICAL ISSUES PRESENT IN HAVING A MEDIATION WHERE AT LEAST ONE OF THE PARTIES, IS A NON-PROFIT ENTITY, SUMMARIZED BY
Charles M. Dalziel, Jr., Member, Gregory, Doyle, Calhoun & Rogers, LLC, Marietta GA
Copyright © 2018
Today’s topic is mediating with non-profits. Easily we could slip into “war stories” with such a broad topic. But the goal of this paper is present a whole framework for the reader to use in contemplating possible events which could lead to litigation for non-profits generally, with full consideration of the different types of non-profit entities that exist, with, necessarily, exposure to different types of claims. An honest consideration of the concept of this paper would create a reasonable belief it will be very long. I’m not going to drown you with a fire hose this morning. Instead, this paper only seeks to provide a “Nutshell” introduction to non-profit entities, lays out examples of different types of claims that can be asserted against non-profit entities, and then tries to sow the seeds of those two concepts together to see what unique concerns arise when the parties are trying through mediation to settle claims against non-profit corporations. Then, the paper plows the field, replants, and sees what concerns arise when the non-profit is the claimant.
ORGANIZATION OF THE NON-PROFIT ORGANIZATION
One can correctly assume that the creation and governance of non-profit entities is a matter of state law. Here in Georgia we have a whole, lengthy chapter of Title 14 dedicated to “NonProfit Corporations,” O.C.G.A 14-3-101 et seq. Seeing the definition of “corporation” in O.C.G.A. 14-3-101(6), one realizes that, yes, this chapter only deals with corporations. But other forms of entity can be used for providing the work of non-profits, such as trusts, LLCs, and even unincorporated associations (e.g., an unincorporated church, Allen v. Zion Baptist Church of Braselton, 328 Ga. App. 208 (2015) ( Church though unincorporated has normal duties of employer creating liability for negligent hiring). In considering the organization of the non-profit, one must consider the documents the non-profit is operating under, whatever they may be. There is ample content on the internet about what people intending to start a non-profit must do when beginning their effort, but a lot of the organizers do not seem to get the memo. Briefly, below, we’ll address organizational requirements and obligations of the various entity types.
1. Non-Profit Corporations.
(a) Right out of the gate in the Nonprofit Corporations Chapter, an unexpected participant in the nonprofit enters the stage. The Superior Court. O.C.G.A. 14-3-160, as a part of the NonProfit Corporation Code enacted by a legislature apparently anticipating some kind of problems with having meetings (it doesn’t appear to say the present NonProfit Corporation Code is a Uniform Act, but the 1968 version was), gives the Superior Court the power to order a meeting upon petition of a director, officer, delegate, member or the Attorney General. The Court devises a plan to give notice reasonably designed to give actual notice to all persons who would be entitled to notice of a meeting held according to corporate documents or the statute, and then most times orders notice; However, the Court can dispense with voting requirements, quorums, provisions requiring a certain percentage vote for an action to pass, etc. O.C.G.A.14-3-170 gives the Attorney General more room to try to step in and weigh in on the affairs of a nonprofit corporation. The Attorney General’s power deals with assets of the nonprofit corporation. The Attorney General can petition the Superior Court to enjoin or set aside the unlawful conveyance, transfer or assignment of assets of a nonprofit corporation if the transferee knew of its unlawfulness. The Attorney General can even move to dissolve the nonprofit corporation if it exceeds or abuses the authority conferred on it by law. These limitations, I dare say, are not frequently on the minds of anyone running a nonprofit corporation or representing it, except in governance battles, but they should be.
(b)An interesting harbor is carved out by the statute for nonprofit corporations in O.C.G.A. 14-3-801. If religious doctrine governing the affairs of a corporation is inconsistent with the provisions of the chapter, on the same subject, the religious doctrine controls to the extent the Constitution requires it (both State and Federal). Here again, the playing field in dealing with nonprofit corporations is just, well, different. In Greer v. Davis, 244 Ga. App. 317, 534 S.E.2d 853(2000), Judge Bedford held a bench trial and held Pastor Greer and his administrative assistant, who led the Cathedral of Faith Church of God In Christ, were liable for a new Trustee’s attorneys fees in bringing an action to force them to give him the church financial records after the two committed a parade of horribles, borrowing $400,000 in the church’s name but apparently not depositing the money into the Church’s account, taking much of the personal property out of the church and trying to cart it off, only being stopped even after a policeman arrived, but still taking everything out of the church library, etc. What was defendants’ defense?? That their conduct was an ecclesiastical matter and protected by O.C.G.A. 14-3-180. WOW. To avoid this argument, the Court of Appeals held that defendants’ conduct violated the Chapter concerning a member’s rights to obtain the corporation’s financial records pursuant to O.C.G.A. 14-3-1620, and violated the church bylaws, which gave an even broader right to review records.
On the flip side, we have First Born Church of the Living God, Inc. v. Hill, 267 Ga. 633, 481 S.E.2d 221 (1997). There, the Supreme Court ruled that if the church’s bylaws only required a meeting every four years, O.C.G.A. 14-3-180 couldn’t be used to force them to have an annual meeting such as provided for in O.C.G.A. 14-3-701.
(c)Anbody can incorporate a nonprofit corporation, 14-3-201, by delivering articles of incorporation to the Secretary of State containing the provisions required by O.C.G.A. 14-3-202(a)(must contain), and undertaking to publish a notice of incorporation in substantially the wording of 14-3-202.1 in the official organ of the county of incorporation once a week for 2 weeks.14-3-202(b) provides provisions the articles may contain. For our purposes, (b)(4) is hot—it permits a provision in the articles eliminating or limiting the liability of a director to the corporation or its members for monetary damages for any action taken,or failure to take action, as a director, except for appropriation of a business opportunity of the corporation, for intentional conduct or a knowing violation of the law, for transactions where the director received an improper financial benefit, or for conflict of interest transactions. Nonprofit corporations are incorporated generally for any lawful purpose, 14-3-301, and have broad powers not specific to nonprofits, 14-3-302. Ultra vires is limited to a member suing the corporation to enjoin the act, or the corporation suing an incumbent or former director, officer, employee or agent of the corporation.
(d)Nonprofits have members, not shareholders. So the nonprofit can set it up where the members pay nothing, or something at their discretion, to become members. O.C.G.A. !4-3-601,602. What can the members do? Vote on the election of directors, if the corporation’s documents authorize it. O.C.G.A. 14-3-140(22), 14-3-610. Members are somewhat exposed to creditor claims when a judgment is returned unsatisfied against the non-profit. O.C.G.A. 14-3-613. Members can’t be expelled except pursuant to a procedure that is fair and reasonable and carried out in good faith(specific qualifying criteria stated). O.C.G.A. 14-3-621.
(e)Delegates are also possible in the Nonprofit structure, O.C.G.A. 14-3-630, but their role is controlled pretty much totally by the nonprofit corporation’s corporate documents. Better look…..
(f)A bizarre provision , O.C.G.A. 14-3-701, requires an annual meeting for nonprofit corporations with members, where the president and the chief financial officer report on the activities and financial condition of the corporation and the members consider and act on items identified in the notice of the meeting. O.C.G.A. 14-3-705,706. Why is it bizarre? If the meeting isn’t held, this doesn’t invalidate what the corporation does. Actions can also be approved by the members without a meeting, using ballots or electronic transmissions. O.C.G.A.14-3-708. There are strange requirements under O.C.G.A. 14-3-720 about lists of members being present at meetings, and a remedy of the superior court postponing the meeting until the list is available. Why is that strange? Again, the failure to comply doesn’t effect the validity of the action. O.C.G.A. 14-3-720. But with this rule out there, why even schedule a meeting, since it’s not necessary to validate the corporation’s actions? And get this, a quorum by statute is 10% of the votes entitled to be cast. O.C.G.A. 14-3-722. The Code’s not expecting active members…
(g)Directors can be elected by a majority of the quorum, 5.1% of all members, O.C.G.A. 13-3-725, or you don’t even have to have members at all. The nonprofit has to have a Board of Directors, and all the corporation’ activities are to be managed by the Board, or a person designated by the Board. O.C.G.A.14-43-801.
(h)The Code assumes the bylaws or articles will provide all things directors, including qualifications, number, election, terms, resignation and removal. O.C.G.A. 14-3-802-808. There are default provisions in the Code on these topics, but they can be overridden by the NonProfit corporation documents. 14-3-809(a) provides a handy feature—an instrument of humiliation—the NonProfit can remove a “designated director” by specific amendment to its articles or bylaws; or, if that’s too much hassle, the who appointed the director can deliver notice removing the director with or without cause. 14-3-809(b). For fraudulent or dishonest conduct, or gross abuse of authority or discretion, 10+% of the voting power can get a director removed by the Superior Court under 14-3-810.
(i)The Board fixes their own compensation…………………14-3-812.
(j)Meetings of the directors in person or electronically may be held, but if not, action may be taken by written consent. Get this, the bylaws or articles can provide the action may be taken by less than the majority. 14-3-821.
(k)Standards of conduct for the directors (in good faith believed to be in the best interest of the corporation, and with the care of an ordinarily prudent person in a like position would exercise under similar circumstances) are imposed (and not displaced by articles, bylaws, etc.) by 14-3-830 and tempered by the right to rely on others in the organization, lawyers, accountants, board committees, and in the case of religious organizations, the ecclesiastical hierarchy, ministers, priests, rabbis, etc.
(l)Is for liability. For a distribution that doesn’t comply with the standards of 830, directors who vote for the distribution are personally liable for the whole amount of the distribution which exceeds permissible amount, and then they can seek contribution from every other director who voted for the distribution.
(m)Now we turn to officers. They are as described in the bylaws or articles(the comment says this section permits corporations to designate the officers it wants). 14-3-840. They have the duties and the authority the articles or bylaws say they do. The CEO or president shall have authority to conduct all ordinary business of the corporation on behalf of the corporation(default provision) unless the articles or bylaws say otherwise. 14-3-841. The standard of conduct for the officers is parallel to that of the directors. 14-3-842. Resignation is by notice in writing, or the Board has seemingly unchecked power to remove any officer at any time. 14-3-843. Officers signing a contract are divided into two tiers. Two signatures are needed. Category One (presiding officer of board and president) can be two signatures, or we can have one from Category One and another from Category two (vice President, Secretary, Treasurer, or Executive Director). If the proper people sign, the signers’ authority cannot be challenged successfully to invalidate the document). 14-3-845. Authority is confirmed by placing a corporate seal on the document. 14-3-846. Catch that, in all your non-profit settlement documents, have the corporate seal “present” on the documents.
(n)Indemnification is of course an issue that could come up in litigation /arbitration/ mediation of claims involving NonProfits. 14-3-851 permits but does not require indemnification of an individual party to the proceeding (director or officer) as long as they met the conduct standards above, for liability. 14-3-851, 856(a). The NonProfit shall indemnify a director who successfully defends a proceeding against the reasonable expenses incurred in connection with the proceeding. (Note that 14-3-850(2) provides a mega definition of director to include officers, and other people serving at the corporation’s request in a wholesale list of capacities—if indemnification arises, one needs to be cognizant of how broad the definition of people who “shall” be indemnified for reasonable expenses is. BETTER GET THAT INSURANCE POLICY! Only if the Director delivers to the corporation a written affirmation of her good faith belief that she has met the relevant standards of conduct and makes a written undertaking to repay any funds advanced if it is ultimately determined that she is not entitled to indemnification, can the NonProfit Corporation advance litigation expenses to the broadly defined Director. Funny, the Code specifically says just the statement “I’ll repay” is sufficient without regard to the financial ability of the signer to actually repay. O.C.G.A.14-3-853. The Board of Directors, now comprised only of the members who don’t have a financial interest in the dispute(“disinterested directors”) or a committee of disinterested directors, can authorize indemnification for expenses. 14-3-853(c)(1). But get this, if there are less than two disinterested(non-corrupted) directors, the whole board including the interested directors can authorize indemnification for interested directors’ expenses by majority vote. The Court can order indemnification under 14-3-854 even if the broadly defined director has not met the applicable standard of conduct. If the director was adjudged liable, his indemnification shall be limited to reasonable expense. If the Nonprofit determines itself to indemnify, it must find the director met the applicable standard of conduct and therefore indemnification for the liability is permissible under the circumstances, in a specific proceeding. The proceeding includes two or more disinterested directors, or a special counsel, or the members(not including the interested directors). 14-3-855. Turning to indemnification for liability and expenses for officers as such, officers who are not directors can receive indemnity as provided in the articles, bylaws, special resolutions, or contract, except for appropriation of corporate opportunity, intentional misconduct, knowing violation of law, unlawful distributions, and receipt of improper personal benefit.
(o)Insurance is permitted to cover indemnification issues, covering claims against employees, agents, directors or officers personally, arising out the individual’s acts as such. O.C.G.A. 14-3-855(even covering situations wouldn’t be covered under corporate law as opposed to the language of the insurance policy; another reason for insiders to buy insurance).
(p)Pre-event bylaw or article indemnification provisions can be included and they are enforceable to the fullest extent permissible by law. 14-3-858.
(r)Conflicting Interest Transactions are governed by O.C.G.A. 14-3-860-865. The hot button here is whether the transaction is a defined “director’s conflicting interest transaction.”860(2). There is a very long definition of conflicting interest in (1). Transactions cannot be enjoined—that’s the perspective from which 14-8-861 comes at it—if they are not Director’s conflicting interest transactions. Indeed, a transaction failing to qualify can’t even give rise to an award of damages or be set aside, in an action by a member or in the right of the corporation, on the ground of the Director’s (non-qualifying) interest. 861(b) provides a dose of prevention, i.e. disclosure of the conflicting interest. The conflicted director discloses the conflict pursuant to O.C.G.A. 14-3-862, and the action needs a majority vote of qualified directors, not less than two. In only limited instances is the interested director not permitted to vote. O.C.G.A. 14-3-862. If the action has to be approved by the members, disclosure of who the parties are in relation to the director which creates the conflict, and the nature of the conflict, must be provided to the members in writing. But after this is done, a majority of the votes to be cast by all qualified members wins the vote, and the vote can ratify past transactions. O.C.G.A.14-3-863(mechanics of vote); 14-3-861 (b)(2) (Members can take action at any time). The Court can itself approve a transaction between the director and the NonProfit, in a proceeding where the Attorney General is a party. 864. Say someone wants to void a conflicting interest transaction involving an officer, as a member or in the interest of the corporation. They can’t, if the transaction was approved by the Board of Directors either before or after the transaction after required disclosure(or approved by the Superior Court in a case brought by the Attorney General). The transaction still can’t be undone, or set aside, or give rise to an award of damages or other sanctions, in the absence of all of those, if the transaction, “judged in the circumstances at the time of the commitment, is established to have been fair to the corporation.” Sorry, no annotations about what is fair.
(s)Amendment of Articles of Incorporation and Bylaws of NonProfits is covered by Article 10, Merger by Article 11, and these are beyond our interest here. The handling of NonProfit assets is governed by Article 12. The directors are given extreme discretion in transactions in the usual course of business. 14-3-1201. This means selling, leasing, exchanging or disposing all of its property. As to mortgaging, pledging, or encumbering the property, discretion is even wider—the act can be outside the regular course of business. Id. For sale or other disposition of the assets outside the regular course, the NonProfit can also do that under 1202(b), but a 2/3 vote of the members, and a board vote and possibly the written approval of somebody else whom the articles or bylaws may require(O.C.G.A. 13-3-1030) are all required. 14-3-1202 only lets the articles and bylaws be more restrictive, permissibly referring to them requiring a greater vote. If there are no members, the board of directors may approve the action by a majority vote, after giving statutory notice. O.C.G.A. 14-3-1302(c). A few other complex rules apply.
(t)Distributions are strictly governed by Article 13. 14-3-1301. Specific rules for distributions permissible are contained in 14-3-1302, which tells who the NonProfit may make distributions to. These are(1) organizations organized for the same or similar purpose; (2) organizations with broader (different) interests where no part of the net earnings inures to the benefit of any individual; (3) a governmental unit. To understand this we have to remind ourselves of the definition of “distribution” in O.C.G.A. 14-3-140(9). A distribution in this context refers to the payment of a dividend or any part of the income or profit of the corporation to its members, directors or officers. Note here we encounter the thought of a nonprofit club, homeowner’s association, etc., as the statute does allow the return to a member of the fee she paid for her membership.
(u)Dissolution is governed by Article 14. Say a NonProfit is buried with claims. If they want to dissolve, the board of directors proposes dissolution to the members with proper notice seeking the vote the articles or bylaws require, and a plan of dissolution must be adopted. 14-3-1402,1403. Then the corporation sends to the Secretary of State a notice of intention to dissolve, publishes a Notice of Intent to Voluntarily Dissolve a Corporation using the statutory form, for two weeks in the official organ of the county in which its registered agent is located. O.C.G.A. 14-3-1404.1. The effect of the notice is that then the corporation may not carry on any business except that which is appropriate to wind up and liquidate its business and affairs. Examples: collecting assets; disposing of properties that will not be distributed in kind; discharging or making provision for discharging its liabilities; distributing its remaining property among its members in accordance with the plan of dissolution; dragnet other winding up activities. To extinguish claims, the corporation shall establish a process of notifying known claimants with claims preceding the notice of the intent to dissolve, telling them that there is now a deadline for claims, and they must provide certain information to the corporation for consideration for their claim by a stated deadline at least six months in the future, and that the claim will be barred if the deadline is not met. Also a bar can be raised if the notified claimant’s claim is rejected in the claims process and he doesn’t sue within a year of the effective date of the rejection notice. 14-3-1404-1408. When the whole winding up procedure has ended, the corporation may file articles of dissolution with the Secretary of State, stating things specified in the statute. 14-3-1409.
(v)The Georgia NonProfit Corporation Code was originally enacted in 1968. As a legacy of that history, it seems to have the underlying premise that its form of organization will cause it to plug into 26 U.S.C. 501(c)(3) as a tax exempt entity. Corporations organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary or educational purposes, or to foster national or international sports competition or for the prevention of cruelty to children or animals are pigeon holed here for their exempt status. So, watch a video on the internet, and the speaker will say that generally 501(c)(3) entities are organized as corporations.
RIGHT HERE AND RIGHT NOW, WE ATTACH A FORM 990 FOR A RETURN BY AN ORGANIZATION EXEMPT FROM INCOME TAX, AND SEVERAL SAMPLE SCHEDULES, SOME OF WHICH VARY BY THE PURPOSE OF THE ORGANIZATION. THESE VERY LENGTHY INFORMATION QUESTIONNAIRES RAISE SOME ISSUES FOR CONSIDERATION IN THE NONPROFIT MEDIATION WORLD
We include Schedule A Public Charity Status and Public Support
Schedule B, Schedule of Contributors, required of some 501(c)(3) entities
Schedule E, for Schools
Schedule I, grants, listing grants received over a certain amount
Schedule M, Schedule of Noncash contributions received
Schedule N, Liquidation, Termination, Dissolution, or significant Disposition of Assets and
Schedule R, Related Organizations and Unrelated Partnerships
You’ll need to study these IRS forms at your Leisure as obviously we have time constraints today
C. TAX EXEMPT LIMITED LIABILITY COMPANIES
Are possible under O.C.G.A. 14-11-201 in Georgia, see whole LLC statute, O.C.G.A.14-11-101 et seq. But LLC members have a different existence than members of NonProfit Corporations, and under 26 U.S.C. 503(c) the members cannot be individuals or nonexempt entities —members must be other 501(c)(3) organizations or governmental units or instrumentalities. Plus there are 12 conditions for an LLC to be considered tax exempt.The LLC has to draft into these 12 requirements, expressly, in their organizational and governing papers. The ”Limited Liability Company Reference Sheet” follows the Schedules behind this page and includes the twelve questions/ requirements for 501(c)(3) treatment. The convenience of the LLC form in a for-profit business format appears lacking in the NonProfit setting.
D. TRUSTS AS NONPROFIT ENTITIES
The Revised Georgia Trust Code of 2010 governs trusts in Georgia. O.C.G.A.53-12-1 et seq. As to taxation, concerns developed prior to 2010 that small non-profit organizations, particularly not organized as corporations, had a very high rate of failure to file their Form 990s. So, more than 750,000 nonprofit organizations had their tax exempt status revoked between 2010-2017. As a non-exempt trust, the trust would have to file Form 1041 and possibly pay taxes. So, the IRS earlier this year issued new instructions for Form 1023—EZ, a streamlined version of Form 1023, “Application for Recognition of Exemption under Section 501 (c) (3) of the Internal Revenue Code.” As you can see, the instructions are 23 pages of questions. An application to the IRS for the 501(c)(3) exemption is generally required, although churches, synagogues, temples and mosques and their associations do not have to file a 503(c)(3) application. If the entity answers yes to any of the worksheet questions, it can’t use Form 1023—EZ; it has to use Form 1023, which is a bear to complete. As a qualified exempt entity, each entity has a foundation qualification under the Tax Code. The main two classifications are Private Foundations and Public Charities. Contributions rule in the choice of designation, with the presumption being the public charity gets its money from a broad base of support, while the Private Foundation has a small number of donors. Section 509(a) of the Code says all 501 (c)(3) entities are private foundations unless they qualifiy as a public charity under 509(a)(c). These public charities can use Form 1023--EZ to apply for their exemption. Here we’re far past the writer’s expertise, so let’s just attach these forms right now and say , in your NonProfit Mediation/ Arbitration, you must make sure the Trust is really tax exempt.
Counter intuitively, O.C.G.A. 53-12-4 throws a conflicts of law issue into consideration, saying as to real property in the trust, the law of the situs of the property applies. Public policy can limit designation of law in the trust document, and if the applicable law is not state, the law of the state with the most significant relationship with the issue applies. Id.
Trusts are peculiarly subjects of equity jurisdiction. 53-12-5. Under O.C.G.A. 53-12-7, the trust document controls not the Court, but others, except as to
1. Requirements of creation and validity of express trusts
2. Effects of rules regarding spendthrift trusts
3. The power of the beneficiaries to alter the trustee’s compensation under 53-12-210
4. The duty of the trustee to administer the trust and to exercise discretionary powers in good faith pursuant to 53-12-240 and 53-12-260
5. The effect of a provision relieving the trustee of liability under 53-12-303
6. Limitations on actions, 53-12-45, 53-12-307.
Suffice it to say, in mediation/arbitration involving trusts, the trust document and pertinent statutes must be reviewed and followed.
The specific Charitable Trust provisions are contained in Article 9, O.C.G.A. 53-12-170 et seq. Permissible charitable purposes are listed in 170, but 171 gives the settlor the power to grant the trusteethe power to choose the recipients without the trust being void for vagueness. Then if the purpose can’t be accomplished, the Court can in equity try to satisfy the purpose in a way as close as possible to the donor’s intent. The Attorney General can enter the stage as to trusts, too, as representative of the charitable beneficiaries, or the District Attorney can do the same. 14-12-174.
An individual, regardless of citizenship or residency, can be a trustee in Georgia, as well as an entity such as a corporation, partnership, LLC, etc. 53-12-200. The trustee’s duties are to administer the trust in good faith, in accordance with the trust and its purposes. 53-12-240(general). Specific duties include (241) to exercise the judgment and care of a prudent person in a like capacity and familiar with such matters, under all the circumstances of the trust, (242) to notify the beneficiaries when a revocable trust becomes irrevocable, (243) to report, (244) to distribute income, (246) to administer the trust solely in the interests of the beneficiaries and (247)to be impartial as between beneficiaries.
53-12-261 gives trustees very broad powers, and these can be incorporated into the trust document. 53-12-261,263. So read that trust document and those statutes!!
E. PRIVATE FOUNDATIONS Article 10 of the Trust Code deals with Private Foundations. The first provision of this law amends the articles of incorporation of any corporation which is a private foundation to comply with certain tax requirements. So the five amendments, effective as of the date of incorporation or January 1, 1972 for corporations incorporated earlier, should be always considered as a part of the articles. 53-12-180……..UNLESS THE CORPORATION AMEND ITS ARTICLES TO EXCLUDE THE STATUTORY AMENDMENTS, DIRECTLY. 53-12-181. It’s possible under the trust statute for the Private Foundation to make distributions of net income of the trust property, but the directors by statute may elect to limit the distributions so as to enable the corporation to avoid tax liability.
Corporate Fiduciaries have their powers enumerated in 53-12-262 but this statute seems to have little application to Private Foundations. So again, read the Foundation’s documents and the very brief Article 10.
F. OTHER TYPES OF NONPROFIT ENTITIES ENCOUNTERED OFTEN IN LITIGATION, BY 501 (C) SUBSECTION
(6) Chambers of Commerce, business leagues, real estate boards, boards of trade, or professional football leagues (Huh?—this is the real group).
(7)Pleasure, recreational or service clubs
(8) Fraternal beneficiary societies
(9) Voluntary employment benefit groups
(10) lodges
(11) Teacher’s Retirement Funds
(13) Cemetery Societies
(14) Credit Unions organizations
(15) very small insurance companies
(16) Farming co-ops
(17) Trusts for unemployment
(18, 21, 22,24) Employee benefit/ERISA trusts
(19,23) Veterans’ Organizations
(26-29) Med trusts, Railroad FELA trusts, workers’ comp trusts Co-op under Affordable Care Act
(25) Real estate Trust, income from property goes to benefit plan, governmental plan, the United States, a state, a local government, etc. and a few other entities
G. PRIVATE ASSOCIATION LIKE THE ENTITY THAT WAS THE CHURCH AT THE BEGINNING OF THE PAPER, Cathedral of Church of God In Christ
Probably if this kind of entity even has documents they are likely not to be followed or if followed, there is no available documentation of following. Do the best you can, or hide under the insurance policy😉
H. WELL THAT’S PRETTY MUCH ALL THE ENTITIES WHICH CAN BE NON-PROFITS I CAN THINK OF. For limitations which might affect a mediation or arbitration or mediation, read the governing documents, the statute, and the Internal Revenue Code. Hotpoints:
1. Limitations of powers of trustee, officer, director, board, CEO to act, both generating claims, and restricting the settlement of claims.
2. Money/ property issues—improper expenditures for personal benefit, distributions, accumulation of property, tax reporting on a timely basis, maintenance of tax exempt status, at end not making distributions to ineligible recipients so that the gain becomes fully taxable and retroactive tax liability is imposed.
3. Whether the entity is allowed to contribute to a settlement of a claim under its particular paperwork—Lots of “WHEREASis” in the Settlement Document.
4. Governance—party issues—who, authority, control of decision making, etc.
5.Publicity—Catholic Church, Crematorium, Religious organization with a Jet or needs one to accomplish aims, “Founder” owns no house but non-profit has 32 including several in resort locations, put big target on their back with wealth, privilege, secrecy or apparent flouting of law, more suits, UNDERWRITING?
6. Founder or Board as King—with Founder board not independent, or Board can wrestle control out of hand of founder and dump Founder—James Dobson
7. Unfamiliarity with, disregard/contempt for organizational documents and law by insider actors
8. Nepotism
9. Conflicts of interest with insurer, non-profit harder to deal with on time limits demand?
10.Multiple people covered under D&O policy with conflicting interests
11. Other coverage issues
12. Lack of organizational policy manuals or worse existence without knowledge or compliance, HR practices weak in comparison to for profit entities.
13. Divergence of interest between local organization and national organization—fraternities, churches, regional differences regarding political/social issues between local entity and national group.
I’m sure you can think of many others……
I.NONPROFIT AS PLAINTIFF
1. Publicity—charitable organizations, religious organizations agents of mercy asserting their rights not well regarded. Authorized by documents and Law?
2. Developing a proper consensus as to what the organization wants in suing, how to achieve litigation/arbitration/
3.Lack of business acumen/ more driven by principle/ I’m right
4. Damages to whom for what
5, Contractual waivers entity has signed bar claims
6.Tribalism, turf wars, difference of opinion as to who is most committed to the cause, why certain actions were taken, with division of roles for employees, unilateral, or even secret, action can be taken. Weakens claims of entity as Plaintiff