D.C. Council Holds Hearing on New Nonprofit Corporation Law

A D.C. Council Committee held a public hearing last week on a bill (B18-500) to overhaul the city’s laws governing the incorporation and operation of a variety of business organizations, including nonprofit corporations.

Most of the testimony at the four-hour hearing focused on how the bill would impact the way nonprofits operate. Among the changes the bill, as introduced, would implement:

• A volunteer immunity provision in current law, insulating volunteers, officers, directors and employees from law suits, would be eliminated.
• Individuals designated as “members” of a nonprofit would have to be given a right to vote on certain “fundamental transactions” involving the organization.
• Individual members of a nonprofit could be held personally liable for obligations of the corporation if the corporation is unable to satisfy a court judgment against it.
• Organizations engaged in “religious activity” (a term that is undefined) might not have to provide their members with access to detailed financial information.
• Under certain circumstances, one director could effectively “veto” amendments to the organization’s Articles of Incorporation.
  

One of the most sweeping changes proposed would be to require all nonprofit corporations incorporated in the District prior to 1962 (called “old Act” corporations) to file periodic reports with the Department of Consumer and Regulatory Affairs (DCRA) or risk losing their right to operate. DCRA estimates that there are some 10,500 such corporations.

Center members are encouraged to review the proposed legislation with their legal advisers and provide comments directly to D.C. City Council Member Muriel Bowser. The official comment period closes in late April, but Ms. Bowser has indicated that she plans to convene a working group of interested individuals to come up with changes to the proposal, with a view toward moving it out of Committee by the fall.

Further information can be obtained from Center for Nonprofit Advancement Board President James M. Goldberg, a Washington attorney who testified at the hearing, at 202-628-2929 or by e-mail.

Thank you to Center Board President James M. Goldberg for contributing this post.