Proposed Revisions to the Washington State Nonprofit Statute - - PowerPoint PPT Presentation
Proposed Revisions to the Washington State Nonprofit Statute November 2, 2017 Judy Andrews, Apex Law Group, Seattle, Washington Jessica Breitbarth, Seattle Childrens Hospital Foundation Ov Overview v The Nonprofit Corporations Committee
Judy Andrews, Apex Law Group, Jessica Breitbarth, Seattle Children’s Hospital Foundation November 2, 2017 Seattle, Washington
vThe Nonprofit Corporations Committee began revisions to Chapter 24.03 RCW in 2009 vThe Model Nonprofit Corporations Act, Third Edition (August, 2008), drafted by the ABA Section on Business Law, Committee on Nonprofit Corporations, was the base for the revised act
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vDraft as one act for all nonprofit corporations vCreate uniformity with Washington Business Corporation Act vKeep law accessible for lay people vProtect charitable assets vProvide congruity with UPMIFA
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vSignificant changes in the current revision to the Act include:
§ Financial powers and limitations; charitable assets § Membership § Directors and Officers § Domestication and conversion § Derivative proceedings
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vClarifies that a nonprofit corporation has power to carry
accumulate reserves
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vClarifies restrictions on distributions and compensation to insiders and liability for unlawful distributions vDefines restricted gifts vProvides for modification of gift restrictions
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vCharitable corporation—a Washington nonprofit
corporation operated primarily or exclusively for one
vCharitable purpose—one that would make a
corporation a 501(c)(3) organization or considered charitable under other applicable law
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vGift instrument—a record, including a solicitation by
a nonprofit, under which property is donated, transferred, granted to, or held by the nonprofit. A solicitation constitutes a gift instrument only if the donation, transfer, or grant of property was made within one year of the solicitation.
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vSolicitation—any invitation for a contribution in the form
transmission or an offer or attempt by the solicitor to sell any property, rights, services, or other thing, in connection with which: § any appeal is made for any charitable purpose; § the name of any charitable corporation is used as an inducement; or § any statement is made that implies that the contribution or the sale proceeds will be applied toward any charitable purpose or donated to any charitable entity.
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vAll property held by a charitable corporation; vProperty subject to restrictions contained in a gift instrument that limit its use to one or more charitable purposes; or vProperty subject to restrictions contained in the articles, bylaws, or any record adopted by the board that limit its use to one or more charitable purposes.
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vProhibits distributions to members, directors,
substantial influence over the affairs of the corporation of
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vReasonable compensation for services rendered or reimbursement of expenses vAnother charitable organization vA noncharitable corporation that confers benefits on members or nonmembers in accordance with its purposes, the repurchase of memberships or the repayment of capital contributions
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vA gift given without restrictions transfers complete
vThe corporation is bound by a restriction imposed by donor in a gift instrument accepted by the corporation vConsequences of failure to comply with or to seek modification of restriction leads to proceeding by Attorney General
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1) Value below amount set in statute 2) Given 20 or more years ago 3) To be used in a manner consistent with charitable purposes in gift instrument
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vModification by agreement between nonprofit, attorney general and interested parties permitted if:
§ As to management or investment restriction, if modification would further charitable purpose or enforcement of restriction is impracticable, wasteful or impairs the use of the gift or § As to purpose restriction, the purpose has become unlawful, impracticable, impossible to achieve or wasteful § Note: Interested party does not include donor or member
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vAttorney General powers added to protect charitable assets
§ Modeled after RCW 11.110 and RCW 19.86 § Right to intervene in certain actions, has specific investigative powers, right to accept an assurance of discontinuance and may request civil penalties, costs and fees on violators
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vTo have statutory members, the Articles must so provide vA member must have some right to vote vMembers have only those rights, powers or obligations assigned in the Articles or Bylaws or the right to vote for directors in the Revised Act.
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vMembers can be terminated even if not so provided in the articles or bylaws vMembers are not personally liable for debts or liabilities of the corporation vRevised Act provides helpful rules on member voting
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§ A director must be at least 18 years old § The board of a public charity must have at least 3 directors § The term of directors may not exceed 5 years § The sole remaining director of a charitable corporation must notify the attorney general within 10 days after the date of resignation
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v Delineation between board and advisory committees v Committees with board delegated power:
§ Must have 2 or more directors as members § Cannot include non-director members (unless one is necessary to comply with law)
v Advisory committees do not have authority of the Board
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vCorporate fiduciary duties of care and loyalty vIncludes duty to disclose material information not known by the Board vProvides for fiduciary duties of officers with discretionary authority vProvides a procedure to resolve a conflict of interest vProhibits officers and directors from taking a business
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vRequires a president, secretary and treasurer vAllows an individual to hold more than one office vSubjects officers with discretionary authority subject to fiduciary duties
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vOffers helpful flexibility for nonprofits
§ Can move to another state without losing corporate status § Can convert to another entity without dissolving
vPermitted if also authorized by statute in Washington or by law of the other state vCharitable assets are protected from diversion vInsider cannot benefit from procedure
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vDerivative proceedings permitted (current law is unclear) vA derivative proceeding is a civil suit brought on behalf of the nonprofit against one or more directors or officers claiming that they breached a fiduciary duty owed to the corporation
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vGives standing to members, directors and former directors to bring action
§ Donors and creditors do not have standing
vMembers’ right can be prohibited or required number of members increased in bylaws vRight of a director or former director cannot be eliminated
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