- Unincorporated Non-profit Associations Statement of Principles 2007
- B. Scope.
- D. Ownership of Property; Claims by and Against the UNA.
- E. Contract and Tort Liability.
- F. Internal Governance, Fiduciary Duties and Agency Authority.
- G. Dissolution, Merger or Conversion.
- SECTIONS FROM THE CALIFORNIA CORPORATION CODE:
- All Pages
G. Dissolution, Merger or Conversion.
Principle #38. A UNA may be dissolved by any of the following methods:
(a) If the governing principles of the association provide a method for dissolution, by that method.
(b) If the governing principles of the association do not provide a method for dissolution, by the affirmative vote of a majority of the members.
(c) If the UNA’s operations have been discontinued for at least three years by the managers or, if the UNA has no incumbent managers, by its last preceding incumbent managers.
(d) If the UNA’s operations have been discontinued, by court order. Comments:
The vote required for dissolution would be a majority vote of the members, unless the governing principles require a higher vote. See Principle #26. Subsections (c) and (d) are only applicable if the UNA is inactive. The derivation for these subsections is Calif. Corp. Code § 18410.
Principle #39. Winding up and termination of a UNA must proceed as follows:
(a) All known debts and liabilities must be paid or adequately provided for;
(b) Any assets subject to a condition requiring return to the person designated by the donor must be transferred to that person;
(c) Any assets subject to a trust (e.g., endowment or restricted gifts) must be distributed in accordance with the trust agreement; and
(d) Any remaining assets must be distributed as follows:
(i) As required by other law that requires assets of a nontaxable UNA to be distributed to another nontaxable UNA with similar purposes;
(ii) In accordance with the UNA’s governing principles; and in the absence of applicable governing principles, to the current members of the association per capita or as the current members direct; or
(iii) If neither (i) nor (ii) apply, the net assets will escheat to the
enacting jurisdiction by the means generally provided for escheat of property in the enacting jurisdiction’s law.
Principle #40. Provisions for mergers of UNAs with or into any other type of legal entity, and for conversion (transformation) of a UNA into another type of legal entity, should be specifically authorized by the Act, unless authority for these types of transactions already exists in the enacting jurisdiction’s other statutes. The provisions should contain the types and contents of documents (e.g., plan of merger or conversion), the required vote to approve the transaction, and the legal effect of the transaction. See Model Entity Transactions Act Articles 2 and 5.
1. These types of transactions are increasingly common. There is no important policy reason for limiting a merger or conversion of a UNA into another UNA or other type of nonprofit organization.
2. Any required approval or review of these transactions by various governmental agencies, e.g., the enacting jurisdiction’s chief legal officer, or legal restrictions on these types of transactions will continue to apply. See Principles 10 and 11.
April 16, 2007