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1 South Carolina General Assembly 2 120th Session, 2013-2014 3 4 S. 552 5 6 STATUS INFORMATION 7 8 General Bill 9 Sponsors: Senator Hayes 10 Document Path: l:\council\bills\nl\13182dg13.docx 11 12 Introduced in the Senate on March 20, 2013 13 Currently residing in the Senate Committee on Judiciary 14 15 Summary: Revised Uniform Unincorporated Nonprofit Association Act 16 17 18 HISTORY OF LEGISLATIVE ACTIONS 19 20 Date Body Action Description with journal page number 21 3/20/2013 Senate Introduced and read first time ( Senate Journalpage 5) 22 3/20/2013 Senate Referred to Committee on Judiciary ( Senate Journalpage 5) 23 1/9/2014 Senate Referred to Subcommittee: Massey (ch), Hembree, Kimpson 24 25 26 VERSIONS OF THIS BILL 27 28 3/20/2013 29 1 2 3 4 5 6 7 8 9 A BILL 10 11 TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 12 1976, BY ADDING CHAPTER 33 TO TITLE 33, SO AS TO 13 ENACT THE “REVISED UNIFORM UNINCORPORATED 14 NONPROFIT ASSOCIATION ACT”, TO AMONG OTHER 15 THINGS, DEFINE TERMS, SPECIFY APPLICABILITY, SET 16 FORTH POWERS OF UNINCORPORATED NONPROFIT 17 ASSOCIATIONS, TO SPECIFY LIABILITY, AND TO SET 18 FORTH THE PROCESS BY WHICH A LEGAL ACTION 19 AGAINST AN ASSOCIATION IS ADJUDICATED. 20 21 Be it enacted by the General Assembly of the State of South 22 Carolina: 23 24 SECTION 1. Title 33 of the 1976 Code is amended by adding: 25 26 “CHAPTER 33 27 28 Revised Uniform Unincorporated Nonprofit Association Act 29 30 Section 333310. This act may be cited as the ‘Revised Uniform 31 Unincorporated Nonprofit Association Act’. 32 33 Section 333320. As used in this chapter: 34 (1) ‘Established practices’ means the practices used by an 35 unincorporated nonprofit association without material change 36 during the most recent five years of its existence, or if it has 37 existed for less than five years, during its entire existence. 38 (2) ‘Governing principles’ means the agreements, whether oral, 39 in a record, or implied from its established practices, or in any 40 combination thereof, that govern the purpose or operation of an 41 unincorporated nonprofit association and the rights and obligations 42 of its members and managers. The term includes any amendment

[552] 2 1 or restatement of the agreements constituting the governing 2 principles. 3 (3) ‘Manager’ means a person that is responsible, alone or in 4 concert with others, for the management of an unincorporated 5 nonprofit association. 6 (4) ‘Member’ means a person that, under the governing 7 principles, may participate in the selection of persons authorized to 8 manage the affairs of the unincorporated nonprofit association or 9 in the development of the policies and activities of the association. 10 (5) ‘Person’ means an individual, corporation, nonprofit 11 corporation, business trust, statutory trust, estate, trust, partnership, 12 limited partnership, limited liability company, general cooperative 13 association, limited cooperative association, unincorporated 14 nonprofit association, statutory trust, common law business trust, 15 association joint venture, public corporation, government or 16 governmental subdivision, agency, or instrumentality, or any other 17 legal or commercial entity. 18 (6) ‘Property’ means all property, whether real, personal, or 19 mixed or tangible or intangible, or any right or interest therein. 20 (7) ‘Record’ means information that is inscribed on a tangible 21 medium or that is stored in an electronic or other medium and is 22 retrievable in perceivable form. 23 (8) ‘Sign’ means, with present intent to authenticate or adopt a 24 record: 25 (a) to execute or adopt a tangible symbol; or 26 (b) to attach to or logically associate with the record an 27 electronic symbol, sound, or process. 28 (9) ‘State’ means a state of the United States, the District of 29 Columbia, Puerto Rico, United States Virgin Islands, or any 30 territory or insular possession subject to the jurisdiction of the 31 United States. 32 (10) ‘Transfer’ means: 33 (a) an assignment; 34 (b) a conveyance; 35 (c) a sale; 36 (d) a lease; 37 (e) an encumbrance, including a mortgage or security 38 interest; 39 (f) a gift; or 40 (g) a transfer by operation of law. 41 (11) ‘Unincorporated nonprofit association’ means an 42 unincorporated organization consisting of two or more members 43 joined under an agreement that is oral, in a record, or implied from

[552] 3 1 conduct, for one or more common, nonprofit purposes. The term 2 does not include: 3 (a) a trust; 4 (b) a marriage, domestic partnership, common law domestic 5 relationship, civil union, or other domestic living arrangement; 6 (c) an organization formed under any other statute that 7 governs the organization and operation of unincorporated 8 associations; 9 (d) a joint tenancy, tenancy in common, or tenancy by the 10 entireties even if the coowners share use of the property for a 11 nonprofit purpose; or 12 (e) a relationship under an agreement in a record that 13 expressly provides that the relationship between the parties does 14 not create an unincorporated nonprofit association. 15 16 REPORTER’S COMMENTS 17 1. ‘Established practices’ are essentially equivalent to the 18 commercial law concepts of course of performance and course of 19 dealing. See UCC Section 1303. Many Unincorporated Nonprofit 20 Associations (UNAs) operate on a very informal basis. Often 21 there are no written procedures or bylaws or what writings they 22 have are very incomplete. Nevertheless, over time they develop 23 and follow various practices. These practices, if followed 24 consistently for at least five years (or during the entire existence of 25 the UNA if it has been in existence less than five years), become 26 established practices and therefore can qualify as part of the 27 UNA’s ‘governing principles.’ An example would be an 28 unincorporated church that has no written bylaws covering the 29 issue of notice of meetings that for the past five years has printed 30 notice of the annual meeting of its members in the church bulletin 31 for the three weeks preceding the annual meeting. This established 32 practice would be part of the church’s governing principles and if 33 followed in the sixth and subsequent years would be determinative 34 of whether reasonable notice of an annual meeting had been given. 35 2. ‘Governing principles’ are the equivalent of the articles of 36 incorporation, bylaws and other documents and established 37 practices that govern the internal affairs of a UNA, sometimes 38 referred to as an entity’s private organic rules. See Model Entity 39 Transactions Act (2007) Section 1102 (31). The ‘governing 40 principles’ of a UNA do not have to be in a written form. This is 41 consistent with partnership law, the for profit equivalent of a UNA. 42 See Uniform Partnership Act (1997) Section 101(7); Uniform 43 Limited Partnership Act (2001) Section 102(13); Revised Uniform

[552] 4 1 Limited Liability Act (2006) Section 102(13). Where there is no 2 clear and oral agreement or record, you would look to the UNAs 3 established practices (subsection (1)). See Comment 1. See also 4 Comment 8. 5 3. A person is a ‘manager’ of a UNA if the individual fits the 6 definition even if that person’s designation might usually be 7 associated with another type of organization. Many UNAs refer to 8 members of their governing boards as ‘directors’ or ‘trustees.’ 9 These designations do not disqualify the organization from being a 10 UNA even though the term ‘director’ is commonly associated with 11 corporations and the term ‘trustee’ is commonly associated with 12 trusts. A manager may, but need not be, a member of the UNA 13 (see Section 3333220); and may, and, in fact in most cases will be, 14 an individual, but various types of entities can also be managers of 15 a UNA (see subsection (5)—definition of person). 16 4. The definition of ‘member’ may reach somewhat beyond 17 decisions of some courts. Either participation in the selection of 18 the management or in the development of policies and activities of 19 the UNA is enough. Both are not required. This broad definition 20 of member ensures that the insulation from liability is provided in 21 all cases in which the common law might have imposed liability 22 on a person, simply because the person was a member. 23 Persons who do not have the right to select a UNA’s manager or 24 to approve its governing policies are not members of the UNA for 25 purposes of this act even though the UNA may call or refer to 26 them as members. A fundraising device commonly used by many 27 nonprofit organizations is a membership drive. In most cases the 28 contributors are not members for purposes of this act. They are 29 not authorized to ‘participate in the selection of persons authorized 30 to manage the affairs of the nonprofit association or in the 31 development of policies and activities of the association.’ Simply 32 because an association calls a person a member does not make the 33 person a member under this act. 34 The role of a member in the affairs of a UNA is described as 35 ‘may participate in the selection’ instead of ‘may select or elect’ 36 the governing board and officers and ‘may participate . . . in the 37 development of policies and activities’ instead of ‘may determine’ 38 policies and activities. This accommodates the act to a great 39 variation in practices and organizational structures. For example, 40 some nonprofit associations permit the president or chair to name 41 some members of the governing board, such as by naming the 42 chairs of principal committees who are designated ex officio 43 members of the governing board. Similarly, the role in

[552] 5 1 determination of policy is described in general terms. ‘Persons 2 authorized to manage the affairs of the association’ is used in the 3 definition instead of president, executive director, officer, member 4 of governing board, and the like. Given the wide variety of 5 organizational structures of nonprofit associations to which this act 6 applies and the informality of many of them, the more generic term 7 is more appropriate. 8 5. The definition of person in subsection (5) is the standard 9 NCCUSL definition of this term. ‘Person’ instead of individual is 10 used to make it clear that associations covered by this act may 11 have individuals, corporations, and other legal entities as members 12 and managers. Unincorporated nonprofit trade associations, for 13 example, commonly have corporations as members. Some 14 national and regional associations of local government officials 15 and agencies have governmental units or agencies as members. 16 6. The definition of ‘record’ in subsection (7) is the standard 17 NCCUSL definition of this term, which makes it clear that emails 18 and other forms of electronic communication qualify as writings. 19 7. The definition of ‘state’ in subsection (9) is the standard 20 NCCUSL definition of this term. 21 8. ‘Unincorporated Nonprofit Association.’ An organization 22 cannot be a UNA if it is organized as a corporation or is a for 23 profit unincorporated entity, e.g., a partnership. On the other hand, 24 not every form of unincorporated nonprofit organization should 25 automatically become a UNA and therefore be able to have limited 26 liability and the other benefits of this statute. That is the reason for 27 the language excluding trusts, domestic living arrangements 28 including marriages and domestic partnerships, and agreements 29 merely to hold title to property as coowners. The laws governing 30 the rights of creditors, trustees and beneficiaries of trusts are well 31 developed and therefore the legal principles in this act are 32 unnecessary. Domestic relations law provides property rights for 33 adults cohabiting together after a legal marriage or in a longterm 34 unmarried status such as what is frequently referred to as a 35 ‘common law marriage’ or the spate of recently enacted domestic 36 partnership and civil union statutes. Living together in any of 37 these domestic living arrangements can probably qualify as an 38 association having a nonprofit purpose, but for public policy 39 reasons these arrangements should not be able to qualify as a UNA 40 and therefore avoid individual liability for taxes and other 41 liabilities. For similar reasons, mere coownership of property, 42 even if for nonprofit purposes, should not automatically result in 43 the applicability of this act. An enacting jurisdiction can choose to

[552] 6 1 expand or reduce the number of types of exclusions consistent with 2 the concept that a UNA is a default form of organization for 3 unincorporated nonprofit entities. 4 ‘Agreement’ rather than ‘contract’ is the appropriate term 5 because the legal requirements for an agreement are less stringent 6 and less formal than for a contract. For example, mutual consent 7 must be present in both but the contractual concept of 8 consideration is not necessary for an agreement. The agreement to 9 form a UNA can be in a ‘record’ (see subsection (7)), or oral, or 10 implied from conduct (e.g., course of performance or course of 11 dealing). The agreement to form a UNA becomes part of the 12 UNA’s overall ‘governing principles’. ‘Implied from conduct’ 13 rather than ‘implied from its established practices’ (see subsection 14 (2)) is used as the standard because the agreement to form a UNA 15 precedes or is contemporaneous with its existence, and established 16 practices can only exist after the UNA is in existence. (subsection 17 (2)). 18 Although it is always preferable to have written agreements, 19 most existing UNAs are quite informal and have few, if any, 20 writings setting forth the agreements governing the purpose and 21 operation of the organization. Moreover, most UNAs are formed 22 and operate without independent legal advice. Imposing a statute 23 of frauds or similar writing requirement would, therefore, have the 24 effect of excluding most existing UNAs from being able to qualify 25 under the act. The enacting jurisdiction’s general rules governing 26 the proof and effect of oral agreements and the priority of written 27 provisions over subsequent inconsistent oral provisions apply to 28 UNA governing principles. See Section 333330. 29 Although the agreement to form a UNA can be quite informal 30 and sketchy, there must be some tangible, objective data such as 31 the use of the organization’s name in communications to its 32 members or third parties, or the existence of a bank account or of a 33 mailing (or internet) address in the name of the UNA or similar 34 ‘conduct’ indicating that, in fact, there is an actual agreement. 35 An express provision in a record stating that the parties to a 36 contract do not intend to create an unincorporated nonprofit 37 association, on the other hand, would negate any conclusion that 38 there was an agreement to have a UNA. See subsection 11(E). An 39 example is a contractual relationship between two nonprofit 40 organizations where the parties do not want the contract to be 41 subject to this act. An express written provision to that effect in 42 the contract should be upheld.

[552] 7 1 The members must be joined together for a common purpose. 2 Several states provide that they be ‘joined together for a stated 3 common purpose’ (emphasis added). Because of the informality 4 of many ad hoc associations, it is prudent not to impose the 5 requirement that the common purpose be ‘stated.’ Very probably, 6 it is the small, informal, ad hoc associations and those third parties 7 affected by them that most need this act. 8 The best reference point for what constitutes a nonprofit purpose 9 is probably the enacting state’s Nonprofit Corporation Act. The 10 nonprofit purpose requirement carries with it the implicit 11 understanding that the purpose is not a criminal activity and is 12 otherwise lawful. Each enacting jurisdiction needs to determine 13 whether these limitations need to be set forth explicitly in the act. 14 The twoperson requirement for forming a UNA is quite 15 minimal, assuming the standard broad definition of person 16 (Subsection (5)) incorporated into the act. At least two persons are 17 required because that is the minimum number necessary to have an 18 agreement under general legal principles. If one person wants to 19 create a nonprofit organization, it is possible to do so by means of 20 a trust, a nonprofit corporation, or in many states, a single member 21 limited liability company. A few states currently require more 22 than two members at the time of formation. New Jersey, for 23 example, requires seven or more. 24 Nonprofit corporation statutes typically allow a nonprofit 25 corporation to be formed by one or more incorporators but to 26 operate without members and therefore to be governed by a 27 selfperpetuating board of directors. See Model Nonprofit 28 Corporation ActThird Edition (2008) Sections 2.02(4), 6.01. A 29 UNA, however, must always have at least two members. The 30 definition of a UNA states that it is an organization ‘consisting of 31 [two] or more members….’ 32 The act applies to all UNAs, whether they be classified as 33 religious, public benefit or mutual benefit or whether they are 34 classified as taxexempt under the laws of the enacting jurisdiction. 35 Therefore, the act will cover unincorporated philanthropic, 36 educational, scientific, social and literary clubs, unions, trade 37 associations, political organizations, such as political parties, 38 churches, hospitals, neighborhood and property owner 39 associations, and sports organizations such as Little League 40 baseball teams. If the enacting jurisdiction decides to exempt one 41 or more types of UNAs from the act, it needs to draft specific 42 provisions listing the exemptions. 43

[552] 8 1 Section 333330. (1) A statute governing a specific type of 2 unincorporated nonprofit association prevails over an inconsistent 3 provision in this chapter, to the extent of the inconsistency. 4 (2) This chapter supplements the law of this State that applies 5 to nonprofit associations operating in this State. If a conflict 6 exists, that law applies. 7 (3) Unless displaced by particular provisions of this chapter, 8 the principles of law and equity supplement this chapter. 9 10 REPORTER’S COMMENTS 11 1. Subsection (1). Examples of other laws that apply to UNAs 12 are general principles of contracts, agency, fraud, estoppel, the 13 priority of written provisions of an agreement over prior 14 inconsistent oral provisions or subsequent oral amendments (and 15 any exceptions), civil and criminal procedural rules, and rules for 16 enforcing judgments. 17 Drafting conventions as to whether these general principles of 18 law should be set forth in separate provisions in an act like this one 19 vary greatly. NCCUSL Acts, as a general rule, do not have 20 provisions other than what is stated in subsection (1). 21 2. Subsection (2). Many jurisdictions have existing statutes 22 governing particular types of UNAs, e.g., churches. Subsection (2) 23 establishes the rule that in the event of an inconsistency between 24 this act and the statute governing a specific type of UNA, the latter 25 will control. Under generally accepted statutory interpretation 26 principles, there is a strong presumption against inconsistency, i.e., 27 the presumption is that the provisions of the two acts are not 28 inconsistent. 29 3. Subsection (3). Most jurisdictions have statutory provisions 30 giving the chief legal officer of the jurisdiction oversight 31 supervisory powers over nonprofit organizations, including the 32 power to enjoin or prohibit various activities. Most jurisdictions 33 also have statutes that require registration, permits or advance 34 notice to engage in certain activities, e.g., fundraising from the 35 public, and the filing of reports, e.g., assumed name filings, tax 36 forms, and the like. All of these existing and future statutes, rules 37 and regulations are applicable to UNAs. Whether specific 38 provisions stating this principle need to be included in the act 39 depends on the enacting jurisdiction’s statutory drafting 40 conventions. 41 42 Section 333340. (A) Except as otherwise provided in 43 subsection (B), the law of this State governs the operation in this

[552] 9 1 State of all unincorporated nonprofit associations formed or 2 operating in this State. 3 (B) Unless the governing principles specify a different 4 jurisdiction, the law of the jurisdiction in which an unincorporated 5 nonprofit association has its main place of activities governs the 6 internal affairs of the association. 7 8 9 REPORTER’S COMMENTS 10 1. This act applies to preexisting UNA, as well as to all UNAs 11 formed in the state after the effective date of the act. 12 2. This act’s applicability to UNAs formed in other jurisdictions 13 that are operating in this state is necessary because in all other 14 types of entities the internal affairs rules of the jurisdiction of the 15 entity’s formation (e.g., the governance rules and duties and 16 responsibilities of the owners and managers to each other and the 17 entity) control; but it is difficult to determine the jurisdiction of a 18 UNA’s formation since it does not, in most jurisdictions, file any 19 public document upon its formation. Some mechanism for 20 choosing the internal affairs jurisdiction is therefore necessary. 21 The default rule in this act is the jurisdiction in which the UNA has 22 its main place of activities. A UNA can, however, designate the 23 internal affairs jurisdiction in its governing principles, subject to 24 applicable conflicts of laws substantial contact rules. See 25 Restatement (Second) of Conflict of Laws Section 187(2) (1971). 26 The term ‘main place of activities’ is not defined but should not 27 be difficult to determine in most cases. The Revised Uniform 28 Partnership Act (1997) Section 106(a) uses the term ‘chief 29 executive office’ in the equivalent section. The Comment to 30 Section 106(a) states that ‘chief executive office’ is also used to 31 determine the proper place for filing a financing statement under 32 UCC Section 9103(3)(d) and it is not defined in the UCC either. 33 Paragraph 5 of the Comment to UCC Section 9103(3)(d) states that 34 the: 35 ‘Chief executive office’ . . . means the place from which in fact 36 the debtor manages the main part of his business operations . . . 37 Doubt may arise as to which is the ‘chief executive office’ of a 38 multistate enterprise, but it would be rare that there could be more 39 than two possibilities . . . [The rule] will be simple to apply in most 40 cases . . . . 41 The term ‘main place of activities’ seems to be a more apt term 42 for UNAs since many of them are quite informal and probably do 43 not have what are commonly thought of as ‘executive offices.’ In

[552] 10 1 any case, most UNAs conduct operations in only one state and 2 those that have operations in more than one state can designate the 3 state that will govern its internal affairs so it will be a rare case 4 when it will be necessary to determine which of two or more 5 states’ laws govern a UNA’s internal affairs. 6 3. Since the laws governing UNAs in the enacting jurisdiction 7 govern UNAs formed in other jurisdictions that are conducting 8 activities (except for internal affairs issues in the enacting 9 jurisdiction), a foreignformed UNA could not conduct activities in 10 the enacting jurisdiction that a UNA formed in this jurisdiction 11 could not conduct, even if the activity were legal in the foreign 12 jurisdiction in which the UNA was formed or has its main place of 13 activities. 14 15 Section 333350. (1) An unincorporated nonprofit association is 16 an entity distinct from its members and managers. 17 (2) An unincorporated nonprofit association has perpetual 18 duration unless the governing principles specify otherwise. 19 (3) An unincorporated nonprofit association has the same 20 powers as an individual to do all things necessary or convenient to 21 carry out its purposes. 22 (4) An unincorporated nonprofit association may engage in 23 profitmaking activities but profits from any activities must be used 24 or set aside for the association’s nonprofit purposes. 25 26 REPORTER’S COMMENTS 27 1. Subsection (1). The separate legal status of a UNA is a 28 fundamental concept that undergirds all the principles that allow a 29 UNA to hold and dispose of property in its own name and to sue 30 and be sued in its own name and that insulates the assets of the 31 members from claims against the UNA. This is a reversal of 32 traditional common law principles that treat partnerships and other 33 unincorporated entities under an aggregate theory. 34 2. Subsection (2). Providing for perpetual existence of a UNA 35 is one of the key aspects of its separate entity status. Under the 36 traditional common law aggregate theory, a UNA’s existence 37 would end with any change in the membership and if the UNA 38 continued in operation it was deemed to be a new UNA. 39 The members can agree to a limited term and a UNA can, of 40 course, terminate by being dissolved and winding up. See Sections 41 3333280 and 3333290.

[552] 11 1 3. Subsection (3). This is a standard general powers clause. 2 See e.g., Revised Uniform Limited Liability Company Act Section 3 105 (2006). 4 4. Subsection (4). Many existing unincorporated nonprofit 5 organizations engage in activities that are intended to produce a 6 profit, e.g., a bingo parlor operated by a church where the profits 7 are used to buy food for a homeless shelter. This type of 8 profitmaking endeavor should not disqualify the organization from 9 being a UNA if it otherwise qualifies. A for profit activity might 10 endanger the taxexempt status of the organization or may generate 11 taxable income, but these are separate issues and should not affect 12 the organizational status of a UNA or the rights and liabilities of its 13 members and managers. 14 The fact that some or all of the members receive some direct or 15 indirect benefit from a UNA’s profitmaking activities will not 16 disqualify an unincorporated nonprofit organization from being a 17 UNA under this act so long as the benefit is in furtherance of the 18 UNA’s nonprofit purposes. The distribution of any profits to the 19 members for the members’ own use, e.g., a dividend distribution to 20 members, would, however, disqualify the organization from being 21 a UNA because the distribution is not made in furtherance of the 22 UNA’s nonprofit purposes. See Section 3333260. The 23 organization would be a general partnership, the default 24 organizational form for a for profit organization. An 25 unincorporated investment club that distributes its profits to its 26 members, for example, would be a general partnership and not a 27 UNA even though its stated purpose is to educate its members 28 about investments. 29 30 Section 333360. (1) An unincorporated nonprofit association 31 may acquire, hold, encumber, or transfer in its name an interest in 32 real or personal property. 33 (2) An unincorporated nonprofit association may be a 34 beneficiary of a trust or contract, a legatee or a devisee. 35 36 REPORTER’S COMMENTS 37 1. Subsection (1) is based on Section 3102(8), Uniform 38 Common Interest Ownership Act. It reverses the common law 39 rule. Inasmuch as an unincorporated nonprofit association was not 40 a legal entity at common law, it could not acquire, hold, or convey 41 real or personal property. Harold J. Ford, Unincorporated 42 NonProfit Associations, 145 (Oxford Univ. Press (1959);

[552] 12 1 Warburton, The Holding of Property by Unincorporated 2 Associations, Conveyancer 318 (SeptemberOctober 1985). 3 2. This strict common law rule has been modified in various 4 ways in most jurisdictions by courts and statutes. For example, 5 courts have held that a gift by will or inter vivos transfer of real 6 property to a nonprofit association is not effective to vest title in 7 the nonprofit association but is effective to vest title in the officers 8 of the association to hold as trustees for the members of the 9 association. Matter of Anderson’s Estate, 571 P. 2d 880 (Okla. 10 App. 1977). 11 A New York statute specifies that a grant by will of real or 12 personal property to an unincorporated association is effective if 13 within three years after probate of the will the association 14 incorporates. McKinney’s N.Y. Estates, Powers, & Trust Law, 15 section 31.3 (1981). 16 As is the case with many of the problems created by the view 17 that an unincorporated association is not an entity, the statutory 18 solutions are often partial limited to special circumstances and 19 associations. Subsection (1) solves this problem for all nonprofit 20 associations, for all kinds of transactions, and for both real and 21 personal property. 22 Section 3333300 deals with attempted transfers of real and 23 personal property to a UNA that were made before the effective 24 date of this act where under the current law title did not vest in the 25 UNA. 26 3. Subsection (2) is a necessary corollary of subsection (a) and, 27 thus, it may be unnecessary. However, several states currently 28 have statutes which expressly provide that an unincorporated, 29 nonprofit association may be a legatee, devisee, or beneficiary. 30 See, for example, Md. Estates & Trusts Code Ann. section 4301 31 (1991). Therefore, it is desirable to continue this as an express 32 rule. Subsection (2) applies to both trusts and contracts. Not all 33 existing state statutes apply expressly to both. 34 35 Section 333370. (A) As used in this section, ‘statement of 36 authority’ means a statement authorizing a person to transfer an 37 interest in real property held in the name of an unincorporated 38 nonprofit association. 39 (B) An interest in real property held in the name of an 40 unincorporated nonprofit association may be transferred by a 41 person authorized to do so in a statement of authority filed by the 42 association in the office in the county in which a transfer of the 43 property would be filed.

[552] 13 1 (C) A statement of authority must set forth: 2 (1) the name of the unincorporated nonprofit association; 3 (2) the address in this State, including the street address, if 4 any, of the association or, if the association does not have an 5 address in this State, its outofstate address; 6 (3) that the association is an unincorporated nonprofit 7 association; and 8 (4) the name, title, or position of a person authorized to 9 transfer an interest in real property held in the name of the 10 association. 11 (D) A statement of authority must be executed in the same 12 manner as a deed by a person other than the person authorized in 13 the statement to transfer the interest. 14 (E) A filing office may collect a fee for filing a statement of 15 authority in the amount authorized for recording a transfer of real 16 property. 17 (F) A document amending, revoking, or canceling a statement 18 of authority or stating that the statement is unauthorized or 19 erroneous must meet the requirements for executing and filing an 20 original statement. 21 (G) Unless canceled earlier, a filed statement of authority and 22 its most recent amendment expire five years after the date of the 23 most recent filing. 24 (H) If the record title to real property is in the name of an 25 unincorporated nonprofit association and the statement of authority 26 is filed in the office of the county in which a transfer of the 27 property would be recorded, the authority of the person named 28 under subsection (C)(4) is conclusive in favor of a person that 29 gives value without notice that the person lacks authority. 30 31 REPORTER’S COMMENTS 32 1. This section is based on Uniform Partnership Act (1997) 33 Section 303. 34 2. A statement of authority need not be filed to conclude an 35 acquisition of or to hold real property. It is concerned only with 36 the sale, lease, encumbrance, and other transfer of an estate or 37 interest in real property. For this, it should, but need not, be filed. 38 The filing, however, provides important documentation. As a 39 general rule a statement of authority will only be filed at the time 40 of a conveyance of an interest in real estate as a means of 41 establishing in the title records who has authority to execute a deed 42 or other instrument conveying an interest in real estate.

[552] 14 1 3. Inasmuch as the statement relates to the authority of a person 2 to act for the association in transferring real property, subsection 3 (B) requires that the statement be filed or recorded in the office 4 where a transfer of the real property would be filed or recorded. 5 This is usually the county in which the real estate is situated. This 6 is where a title search concerning the real estate would be 7 conducted. Uniform Partnership Act (1997) Section 303 also 8 provides for central filing, such as with the Secretary of State, but 9 its statement of partnership authority concerns authority of partners 10 generally, not just with respect to real estate. 11 4. Subsection (C)(2) may present a problem for small, adhoc 12 nonprofit associations. They may have no fixed office address. 13 They may meet in the homes of their leaders. However, if they 14 distribute literature or file petitions they are likely to have a 15 mailing address of some kind, e.g., the mailing address of a 16 member or manager. 17 5. Subsection (C)(3) informs those relying on the statement of 18 the precise character of the organization. Knowing that the 19 organization is an unincorporated nonprofit association may cause 20 the person dealing with the organization to act differently. 21 6. Subsection (C)(4) permits the statement to identify as the 22 person who can act for the association someone who holds a 23 particular office, such as president. This designation relieves the 24 association from the need to make additional filings on each 25 change of officers. Under local title standards and practices the 26 transferee and filing or recording office are likely to require a 27 certificate of incumbency if the statement designates the holder of 28 an office. 29 7. Subsection (D) is designed to reduce the risk of fraud and to 30 reflect law and practice applicable to other organizations. It 31 requires someone other than the person authorized to deal with the 32 real property to execute the statement of authority on behalf of the 33 nonprofit association. 34 8. Subsection (G) makes a statement inoperative five years after 35 its most recent recording or filing. A new statement of authority 36 can be filed before or after the expiration of the five year 37 limitation. 38 9. Subsection (H) is based on Uniform Partnership Act (1997) 39 Section 303(h). Its obvious purpose is to protect good faith 40 purchasers for value without notice who rely on the statement, 41 including those who acquire a security interest in the real property. 42 If the required signatures on the statement, deed, or both are 43 forgeries, the effect of them is not governed by subsection (H).

[552] 15 1 Instead, Section 3333300 applies and would invoke the other law 2 of the State. In many states the deed would be a nullity. See 3 Boyer, Hovenkamp, and Kurtz, THE LAW OF PROPERTY, An 4 Introductory Survey (West Pub. Co. 4th ed. 1991). 5 6 Section 333380. (A) A debt, obligation, or other liability of 7 an unincorporated nonprofit association, whether arising in 8 contract, tort, or otherwise: 9 (1) is solely the debt, obligation, or other liability of the 10 association; and 11 (2) does not become a debt, obligation, or other liability of a 12 member or manager solely because the member acts as a member 13 or the manager acts as the manager. 14 (B) A person’s status as a member or manager does not prevent 15 or restrict law other than this chapter from imposing liability on 16 the person or the association because of the person’s conduct. 17 18 REPORTER’S COMMENTS 19 1. The effect of this section is to provide members and managers 20 of a UNA with the same protection against vicarious liability for 21 the debts and obligations of the UNA and tort liability imposed on 22 the UNA as the members and managers of a nonprofit corporation 23 would have under the enacting jurisdiction’s laws. These 24 principles, taken together, constitute what is known as the limited 25 liability doctrine under which a member or manager is personally 26 liable for his or her own tortious conduct under all circumstances 27 and is personally liable for contract liabilities incurred on behalf of 28 the UNA if the member or manager guarantees or otherwise 29 assumes personal liability for the contract or fails to disclose that 30 he or she is acting as the agent for the UNA. A member or 31 manager is not otherwise personally liable for the tort or contract 32 liabilities imposed upon the UNA. A creditor with a judgment 33 against the UNA must seek to satisfy the judgment out of the 34 UNA’s assets but cannot levy execution against the assets of a 35 member or manager. 36 The one exception is the alter ego doctrine (also known as the 37 veil piercing doctrine). Courts have pierced the corporate veil of 38 nonprofit corporations. See Comment, Piercing the Nonprofit 39 Corporate Veil, 66 Marq. L. Rev. 134 (1984); Macaluso v. 40 Jenkins, 95 Ill.App.3d 461, 420 N.E.2d 251 (1981)(President of 41 nonprofit corporation who commingled funds of the nonprofit 42 corporation with funds of a corporation he controlled held 43 personally liable for unpaid debts of the nonprofit corporation

[552] 16 1 under the veil piercing doctrine). The fact that members of 2 nonprofit corporations for the most part do not have an expectation 3 of financial gain, as compared to shareholders of a for profit 4 corporation, should mean that there will be fewer types of cases 5 than those involving for profit corporations where the veil piercing 6 doctrine will be held to be applicable to nonprofit corporations. 7 The same criteria that are applied to pierce the veil of nonprofit 8 corporations should be applied in UNA veil piercing cases. 9 If the alter ego doctrine is found to be applicable , the separate 10 entity status of a UNA would be disregarded and the assets of the 11 UNA and its members and managers would be aggregated and 12 subject to a UNA creditor’s claims in the same manner that a 13 judgment creditor collects a judgment against the assets of a 14 general partner in a general partnership. 15 2. In recent years all states have enacted laws providing unpaid 16 officers, board members and other volunteers some protection 17 from liability for their own negligence (but generally not for 18 conduct that is determined to constitute gross negligence or willful 19 or reckless misconduct). The statutes vary greatly as to who is 20 covered, for what conduct protection is given, and the conditions 21 imposed for the freedom from liability. Some apply only to 22 nonprofit corporations. State Liability Laws for Charitable 23 Organizations and Volunteers (Nonprofit Risk Management & 24 Insurance Institute, 1990); Developments, Nonprofit Corporations, 25 105 Harv. L. Rev. 1578, 16851696 (1992). This means that 26 members and volunteers involved with unincorporated nonprofit 27 associations do not obtain protection under those state statutes. 28 Others may cover the managers of UNAs but only if the UNA 29 qualifies as a taxexempt entity under federal or state law. See N.Y. 30 Not For Profit Corporation Law Sections 720a and 721 (federal 31 income tax); Minn. Stat. Ann. 317A.257 (state income tax). Some 32 states have statutes that premise the insulation of liability upon the 33 organizations having specified amounts of liability insurance. 34 In 1997 Congress enacted the Volunteer Protection Act, 42 35 U.S.C.A. Sections 1450114505. This statute, which preempts state 36 laws to the extent of any inconsistency with the Volunteer 37 Protection Act except to the extent the state law provides 38 additional protections from liability, insulates directors, officers, 39 trustees and direct service volunteers of nonprofit organizations 40 who receive no compensation (other than reasonable 41 reimbursement of expenses) from liability for harm that ‘was not 42 caused by willful or criminal misconduct, gross negligence, 43 reckless misconduct, or a conscious or flagrant indifference to the

[552] 17 1 rights or safety of the individual harmed by the volunteer.’ 42 2 U.S.C.A. Section 14503(a)(3). Damages caused by operation of ‘a 3 motor vehicle, vessel, aircraft, or other vehicle’ for which a license 4 or insurance is required to be maintained, are not covered. 42 5 U.S.C.A. Section 14503(4). 6 The interplay between the Federal Volunteer Protection Act and 7 the existing state statutes that provide liability protection to 8 volunteers of UNAs is a complex matter and must be determined 9 on a statebystate basis. See subsection (b). 10 Finally, the liability of the managers of a UNA for breach of the 11 duties of due care, good faith and loyalty to the UNA and the 12 ability of the governing principles of a UNA to limit or eliminate 13 this liability as far as monetary damages are concerned is a 14 separate subject which is dealt with in Section 3333230. 15 3. ‘Solely’ as used in this section is intended to make it clear that 16 a member or manager is not vicariously liable for the liabilities of 17 the UNA or the liabilities of another member or manager merely 18 because of that person’s status as a member or manager. A 19 member or manager may, however, have personal liability as a 20 result of his or her own actions. A member or manager will be 21 personally liable, for example, for his or her own tortious acts, or 22 for breach of a contract binding on the UNA which the member or 23 manager is a party to or has guaranteed. This personal liability is 24 imposed by other law (see subsection (B) of this section and 25 Section 3333230) and not because of his or her status as a member 26 or manager. 27 28 Section 333390. (A) An unincorporated nonprofit association 29 may sue or be sued in its own name. 30 (B) A member or manager may assert a claim the member or 31 manager has against the unincorporated nonprofit association. An 32 association may assert a claim it has against a member or manager. 33 34 REPORTER’S COMMENTS 35 1. Under traditional common law doctrine, a UNA was 36 considered to be an aggregate of members and therefore it could 37 not sue or be sued in its own name. Only the members could sue 38 or be sued and some state court cases held that all of the members 39 had to be named plaintiffs in a suit brought on behalf of the UNA 40 and that all the members had to be named, and served with the 41 Summons and Complaint in a suit against a UNA. Most states 42 have enacted statutes in recent years granting a UNA entity status 43 for the purpose of suits by and against the UNA. Section 3333100

[552] 18 1 follows the modern rule and is consistent with the concept built 2 into this act that a UNA is a separate entity for many more 3 purposes than existed under traditional common law principles. 4 2. This section is intended to apply to all types of judicial, 5 administrative and governmental proceedings and all types of 6 alternative dispute resolution proceedings such as arbitration and 7 mediation. 8 3. Subsection (B) is another aspect of a UNA under the act being 9 a separate legal entity. Under the common law aggregate theory, 10 since a UNA was not an entity separate from its members, a 11 member could not assert a claim against the UNA since there is 12 technically no legal entity, and the member would be both a 13 claimant and the defendant and personally liable for any judgment 14 obtained in the action. For the same reason, a UNA could not 15 assert a claim against a member (e.g., for unpaid dues) because the 16 UNA technically does not exist. This subsection only allows a 17 member to assert that member’s claim against the UNA. It does 18 not authorize a member to file a derivative action. The enacting 19 jurisdiction’s civil procedure law may, however, authorize 20 derivative actions. 21 22 Section 3333100. A judgment or order against an 23 unincorporated nonprofit association is not by itself a judgment or 24 order against a member or manager. 25 26 REPORTER’S COMMENTS 27 1. This section is consistent with Restatement (Second) of 28 Judgments, Section 61(2), which provides: ‘If under applicable law 29 an unincorporated association is treated as a jural entity distinct 30 from its members, a judgment for or against the association has the 31 same effects with respect to the association and its members as a 32 judgment for or against a corporation . . . .’ 33 2. This section applies not only to judgments but also to orders, 34 such as an award rendered in arbitration or an injunction. 35 3. This section reverses the common law rule. Under the 36 common law’s aggregate view of an unincorporated association, 37 members, as coprincipals, were individually liable for obligations 38 of the association. 39 4. That a judgment against a UNA is not also a judgment against 40 one authorized to manage the affairs of the association recognizes 41 fully the entity status of a nonprofit association. An obvious 42 corollary of this section is that a judgment against a nonprofit 43 association may not be satisfied against a member unless there is

[552] 19 1 also a judgment against the member. The one exception to this 2 rule would be an injunction issued against a UNA. Federal Rules 3 of Civil Procedure 65(d) provides that every injunction and 4 restraining order is binding not only on the named parties but also 5 on ‘the parties’ officers, agents, servants, employees, and attorneys 6 . . . who receive actual notice of it by personal notice or 7 otherwise.’ 8 9 Section 3333110. In an action or proceeding against an 10 unincorporated nonprofit association, process may be served on an 11 agent authorized by appointment to receive service of process, on a 12 manager of the association, or in any other manner authorized by 13 the law of this State. 14 15 REPORTERS COMMENT 16 1. ‘Manager’ is a defined term. See Section 333320(3). Service 17 on a member of a UNA (also a defined term see section 2(4)) 18 would not be effective under this section unless the member was 19 also a manager of the UNA. 20 21 Section 3333120. An action or proceeding against an 22 unincorporated nonprofit association does not abate merely 23 because of a change in its members or managers. 24 25 REPORTER’S COMMENTS 26 This provision reverses the common law rule of partnerships, 27 which courts often extended to unincorporated nonprofit 28 associations. Uniform Partnership Act (1914) Sections 29 and 29 31(4). This act’s entity approach requires this change to the old 30 common law rule. See Uniform Partnership Act (1997) Sections 31 603(a) 701, and 801. 32 33 Section 3333130. Unless otherwise provided by law other than 34 this chapter, venue of an action against an unincorporated 35 nonprofit association brought in this State is determined under the 36 statutes applicable to an action brought in this State against a 37 corporation. 38 39 Section 3333140. A member is not an agent of the association 40 solely by reason of being a member. 41 42 REPORTER’S COMMENTS

[552] 20 1 1. The purpose of this section is to make it clear that a person’s 2 status as a member does not by itself make that person an agent of 3 the UNA. This is contrary to partnership law where the general 4 partners are considered to be general agents of the partnership and 5 can bind the partnership for acts in the ordinary course of business. 6 Agency and the power to bind in a UNA are determined under the 7 enacting state’s agency law. See Section 333330. Under agency 8 law the managers of a UNA would in most cases be considered as 9 having apparent authority to bind the UNA for acts in the ordinary 10 course of the UNA’s business. Therefore a member who is also a 11 manager would be considered to be an agent of the UNA but this is 12 because that person is a manager as well as a member of the UNA, 13 and therefore the agency authority is not ‘solely by reason of being 14 a member.’ Under agency law, a member might have actual 15 authority to bind the UNA or might have apparent authority to 16 bind the UNA because of the member’s established course of 17 dealing with third parties or under an estoppel theory. Again, the 18 member’s agency authority to bind is not solely because of the 19 member’s status as a member. 20 2. A UNA might be directly or vicariously liable for actions of a 21 member under general law other than agency law. For example, 22 under the doctrine of respondeat superior, a UNA might be liable 23 for the tortious conduct of a member who is found to be acting as a 24 servant of the UNA at the time of the tortious conduct or for 25 negligently supervising a member who is acting on behalf of the 26 UNA. See Section 333380. 27 28 Section 3333150. (A) Except as otherwise provided in the 29 governing principles, an unincorporated nonprofit association must 30 have the approval of its members to: 31 (1) admit, suspend, dismiss, or expel a member; 32 (2) select or dismiss a manager; 33 (3) adopt, amend, or repeal the governing principles; 34 (4) sell, lease, exchange, or otherwise dispose of all, or 35 substantially all, of the association’s property, with or without the 36 association’s goodwill, outside the ordinary course of its activities; 37 (5) dissolve under Section 3333270(A)(2) or merge under 38 Section 3333290; 39 (6) undertake any other act outside the ordinary course of the 40 association’s activities; or 41 (7) determine the policy and purposes of the association.

[552] 21 1 (B) An unincorporated nonprofit association must have the 2 approval of the members to do any other act or exercise a right that 3 the governing principles require to be approved by members. 4 5 Section 3333160. (A) Unless the governing principles provide 6 otherwise: 7 (1) approval of a matter by members requires an affirmative 8 majority of the votes cast at a meeting of members; and 9 (2) each member is entitled to one vote on each matter that is 10 submitted for approval by members. 11 (B) The governing principles may provide for the: 12 (1) calling, location, and timing of member meetings; 13 (2) notice and quorum requirements for member meetings; 14 (3) conduct of meetings; 15 (4) taking of action by the members by consent without a 16 meeting or casting ballots; and 17 (5) participation by members in a member meeting by 18 telephone or other means of electronic communication. 19 (C) If the governing principles do not provide for a matter 20 described in subsection (B), customary usages and principles of 21 parliamentary law and procedure apply. 22 23 REPORTER’S COMMENTS 24 Sections 3333160 through 270 deal with governance issues and 25 are often referred to as internal affairs rules. They establish the 26 rules governing the relation of the members and managers to each 27 other and to the UNA. Many but not all of these provisions are 28 default rules that can be varied by the UNA’s governing principles. 29 Liability to third parties is covered by other provisions of this act. 30 See Section 333380. The internal affairs rules in Sections 3333170 31 through 270 apply to UNAs formed in the enacting state. The 32 internal rules of UNAs formed in other jurisdictions are 33 determined under Section 333340. 34 1. The principles set forth in this section—members vote on a 35 per capita basis, notice of meetings and majority vote for approval 36 actions—are all default rules. They apply unless there are 37 different rules in the UNA’s governing principles. Thus, if a 38 UNA’s bylaws specified that only some members have voting 39 rights, then only those so designated would have voting rights. 40 Similarly, if the bylaws specified that all members are entitled to 41 vote on specific actions (e.g., election of a board of directors), but 42 a subset of members is the approving authority for all other 43 matters, the bylaws would trump the default rules. In addition,

[552] 22 1 bylaw provisions that provided for a higher (or lower) voting 2 percentage rather than the majority vote required by the statutory 3 default rule would control. 4 2. There is one limitation on the authority to modify member 5 approval rights. A UNA must always have at least two members. 6 See Section 333320(11). Therefore, the governing principles 7 cannot specify that a UNA have one or no members. 8 3. A UNA will undoubtedly have some kind of notice and 9 quorum requirements and meeting procedures in its governing 10 principles, which include its established practices. If it does not 11 have any such requirements (e.g., it is newly formed and is holding 12 its initial meeting), it can create them at that meeting and these 13 requirements, even if oral, become over time the UNA’s 14 established practices and therefore part of the UNA’s governing 15 principles. 16 17 Section 3333170. (A) A member does not have a fiduciary 18 duty to an unincorporated nonprofit association or to another 19 member solely by reason of being a member. 20 (B) A member shall discharge the duties to the unincorporated 21 nonprofit association and the other members and exercise any 22 rights under this chapter consistent with the governing principles 23 and the obligation of good faith and fair dealing. 24 25 REPORTER’S COMMENTS 26 Members of a UNA, like members of a limited liability 27 company in a manager managed LLC (see Revised Uniform 28 Limited Liability Company Act (2006) Section 409(g)(5) and 29 limited partners in a limited partnership (see Revised Uniform 30 Limited Partnership Act (2001) Section 305(a)), do not have 31 fiduciary duties (generally defined as a duty of loyalty and good 32 faith) to the UNA or the other members by virtue of their status as 33 members. A member who undertakes managerial duties, however, 34 would have the fiduciary duties of a manager (see Section 35 3333240). 36 While they have no fiduciary duties, members do have the 37 obligation to discharge any duties and any rights they exercise 38 pursuant to this act or pursuant to the UNA’s governing principles 39 consistent with the obligation of good faith and fair dealing. See 40 Revised Uniform Limited Liability Company Act (2006) Section 41 409(d); Revised Uniform Limited Partnership Act (2001) Section 42 305(b). A member cannot, for example, disclose confidential 43 information obtained from the UNA to third parties. The

[552] 23 1 obligation of good faith and fair dealing is not strictly speaking a 2 fiduciary duty but rather is a duty that is derived from the 3 consensual or contract nature of a UNA. See Restatement 4 (Second) of Contracts (1981) Section 205. The duty of good faith 5 and fair dealing of a member in a UNA cannot be altered or varied. 6 In this respect, it differs from the similar rule in partnerships and 7 limited liability companies. See Uniform Partnership Act (1997) 8 Sections 103(4), 404(c), 603(b)(3); Uniform Limited Liability 9 Company Act (2006) Sections 110(c)(4), 409(c). 10 11 Section 3333180. (A) A person becomes a member and 12 may be suspended, dismissed, or expelled in accordance with the 13 association’s governing principles. If there are no applicable 14 governing principles, a person may become a member or be 15 suspended, dismissed, or expelled from an association only by a 16 vote of its members. A person may not be admitted as a member 17 without the person’s consent. 18 (B) Unless the governing principles provide otherwise, the 19 suspension, dismissal, or expulsion of a member does not relieve 20 the member from any unpaid capital contribution, dues, 21 assessments, fees, or other obligation incurred or commitment 22 made by the member before the suspension, dismissal, or 23 expulsion. 24 25 REPORTER’S COMMENTS 26 1. The default rule for admission, suspension, dismissal, or 27 expulsion of members is a majority vote of members. See Section 28 3333180. If the UNA’s governing principles provide otherwise, 29 the governing principles would be applicable. 30 2. Subsection (B) makes it clear that suspension, dismissal, or 31 expulsion do not relieve a member of any obligations it owes the 32 UNA. 33 34 Section 3333190. (A) A member may resign as a member in 35 accordance with the governing principles. In the absence of 36 applicable governing principles, a member may resign at any time. 37 (B) Unless the governing principles provide otherwise, 38 resignation of a member does not relieve the member from any 39 unpaid capital contribution, dues, assessments, fees, or other 40 obligation incurred or commitment made by the member before 41 resignation. 42 43 REPORTER’S COMMENTS

[552] 24 1 Preventing a member from voluntarily withdrawing from a 2 UNA would be unconstitutional and void on public policy 3 grounds. A UNA should, however, be able to impose reasonable 4 restrictions on withdrawal, for example, requiring thirty days’ 5 advance notice. Moreover, as subsection (B) states, a member 6 who resigns remains liable for obligations and commitments made 7 before the resignation. 8 9 Section 3333200. Except as otherwise provided in the 10 governing principles, a member’s interest or any right under the 11 governing principles is not transferable. 12 13 REPORTER’S COMMENTS 14 This is a basic common sense rule. A member of a church that 15 is a UNA, for example, should not be able to transfer his or her 16 membership to a third party. There may be situations where a 17 UNA might be willing to allow transfers. In those situations, the 18 transfer could be made in accordance with the UNA’s governing 19 principles. Condominium homeowners association bylaws, for 20 example, frequently authorize automatic transfer of membership in 21 the association upon transfer of title in the condominium. 22 23 Section 3333210. Except as otherwise provided in this chapter 24 or the governing principles: 25 (1) only the members may select a manager or managers; 26 (2) a manager may be a member or a nonmember; 27 (3) if a manager is not selected, all members are managers; 28 (4) each manager has equal rights in the management and 29 conduct of the association’s activities; 30 (5) all matters relating to the association’s activities are 31 decided by its managers except for matters reserved for approval 32 by members in Section 3333160; and 33 (6) a difference among managers is decided by a majority of 34 the managers. 35 36 REPORTER’S COMMENTS 37 1. ‘Manager’ is a defined term. See Section 333320(3). 38 2. The default rule is all members are managers. In UNAs such 39 as churches with large numbers of members, this default rule will 40 rarely be applicable because the governing principles will in most 41 situations provide a selection process for managers. 42 3. Subsections (4)(each manager has equal management rights), 43 (5)(managers manage the UNA’s activities), and (6)(differences

[552] 25 1 between the managers are resolved by majority vote) are consistent 2 with the rights of general partners in a partnership and the 3 managers of a limited liability company. See Uniform Partnership 4 Act (1997) Section 401; Revised Uniform Limited Liability 5 Company Act (2006) Section 407. 6 4. The rules in this section are default rules that can be varied by 7 a UNA’s governing principles. The intent is to allow maximum 8 flexibility. The UNA’s governing principles can provide for any 9 type of managerial structure the UNA wants to have. Choices 10 range from a traditional board of directors or board of trustees, to 11 third parties who manage the UNA under a contract. The 12 managerial responsibilities can be split between the various 13 managers (e.g., one manager in charge of finances, another in 14 charge of programs). Members who are also managers will have a 15 dual status and their duties and liabilities will be based on the 16 capacity in which they are acting at the time an action (or 17 omission) takes place. 18 19 Section 3333220. (A) A manager owes to the unincorporated 20 nonprofit association and to its members the duties of loyalty and 21 care. 22 (B) A manager shall manage the unincorporated nonprofit 23 association in good faith, in a manner the manager reasonably 24 believes to be in the best interests of the association, and with such 25 care, including reasonable inquiry, as a prudent person would 26 reasonably exercise in a similar position and under similar 27 circumstances. A manager may rely in good faith on any opinion, 28 report, statement, or other information provided by another person 29 that the manager reasonably believes is a competent and reliable 30 source for the information. 31 (C) After full disclosure of all material facts, a specific act or 32 transaction that would otherwise violate the duty of loyalty by a 33 manager may be authorized or ratified by a majority of the 34 members that are not interested directly or indirectly in the act or 35 transaction. 36 (D) A manager that makes a business judgment in good faith 37 satisfies the duties specified in subsection (A) if the manager: 38 (1) is not interested, directly or indirectly, in the subject of 39 the business judgment and is otherwise able to exercise 40 independent judgment; 41 (2) is informed with respect to the subject of the business 42 judgment to the extent the manager reasonably believes to be 43 appropriate under the circumstances; and

[552] 26 1 (3) believes that the business judgment is in the best interests 2 of the unincorporated nonprofit association and in accordance with 3 its purposes. 4 (E) The governing principles in a record may limit or eliminate 5 the liability of a manager to the unincorporated nonprofit 6 association or its members for damages for any action taken, or for 7 failure to take any action, as a manager, except liability for: 8 (1) the amount of financial benefit improperly received by a 9 manager; 10 (2) an intentional infliction of harm on the association or one 11 or more of its members; 12 (3) an intentional violation of criminal law; 13 (4) breach of the duty of loyalty; or 14 (5) improper distributions. 15 16 REPORTER’S COMMENTS 17 1. This section deals with what are generally referred to as 18 fiduciary duties. Only individuals exercising managerial authority 19 in a UNA have fiduciary duties. This is consistent with U.S. 20 business entity laws. See, e.g., Uniform Limited Liability 21 Company Act (2006) Section 409; Revised Model Business 22 Corporation Act Sections 8.30 and 8.31. Thus, members of a 23 UNA do not have any fiduciary duties to the other members or to 24 the managers or to the UNA, unless the member is also a manager. 25 See Section 3333170. In this event that member, in his or her 26 capacity as a manager, would have the fiduciary duties that the 27 other managers of the UNA have. 28 2. The two fundamental fiduciary duties are care and loyalty. 29 Good faith is sometimes characterized as a fiduciary duty but with 30 respect to unincorporated business entities is designated as a 31 contract based obligation. See, e.g., Uniform Limited Liability 32 Company Act (2006) Section 409(d). 33 3. Subsection (B) describes how a manager exercises care and 34 good faith in making decisions. Subsection (D) describes what is 35 known as the business judgment rule, which in effect is a defense 36 to a breach of care claim. 37 4. Under subsection (C) a potential breach of loyalty claim (e.g., 38 conflict of interest transaction or appropriation of something that 39 falls within what is commonly called the ‘corporate opportunity’ 40 or ‘enterprise opportunity’ doctrine or engaging in competing 41 activities) can be avoided by advance approval or ratification after 42 full disclosure of the facts. Note also that under subsection (D)(1)

[552] 27 1 having a conflict of interest precludes the application of the 2 business judgment rule. 3 5. Subsection (E) states that the governing principles of a UNA 4 can limit or eliminate the monetary liability of a manager who is 5 found to have breached a fiduciary duty except for the five 6 exceptions listed in the subsection. Even if the manager is exempt 7 from monetary damages, he or she could still be bound by an 8 injunction or other equitable remedy granted by a court. This 9 limitation, unlike most governing principles, must be in a record, 10 which means that it must be in some kind of writing. 11 6. This section only deals with the liability of a UNA manager to 12 the UNA and its members. Liability of a manager to third parties 13 is dealt with in other sections of this act. See Section 333380 and 14 Comment 2 to Section 333380 dealing with limitations on liability 15 to third parties under state and federal volunteer protection acts. 16 17 Section 3333230. (A) The governing principles may 18 provide for the: 19 (1) calling, location, and timing of manager meetings; 20 (2) notice and quorum requirements for manager meetings; 21 (3) conduct of manager meetings; 22 (4) taking of action by the managers by consent without a 23 meeting; and 24 (5) participation by manages in a manager meeting by 25 telephone or other means of electronic communication. 26 (B) If the governing principles do not provide for a matter 27 described in subsection (A) customary usages and principles of 28 parliamentary law and procedure apply. 29 30 REPORTER’S COMMENTS 31 1. A UNA will undoubtedly have some kind of notice and 32 quorum requirements and meeting procedures in its governing 33 principles which include its established practices. If a UNA does 34 not have any such requirements (e.g., it is newly formed and is 35 holding its initial meeting), it can create them at that meeting and 36 those requirements, even if oral, become the established practices 37 and therefore part of the UNA’s governing principles. 38 2. The use of proxies in manager meetings will be determined by 39 other applicable law. See Section 333330. As a general rule, 40 directors or other persons performing managerial responsibilities 41 may, consistent with a UNA’s governing principles, delegate one 42 or more duties to another person, but they are not authorized to 43 give another person a proxy to vote on a matter.

[552] 28 1 2 Section 3333240. (A) On reasonable notice, a member or 3 manager of an unincorporated nonprofit association may inspect 4 and copy during the unincorporated nonprofit association’s regular 5 operating hours, at a reasonable location specified by the 6 association, any record maintained by the association regarding its 7 activities, financial condition, and other circumstances, to the 8 extent the information is material to the member’s or manager’s 9 rights and duties under the governing principles. 10 (B) An unincorporated nonprofit association may impose 11 reasonable restrictions on access to and use of information to be 12 furnished under this section, including designating the information 13 confidential and imposing obligations of nondisclosure and 14 safeguarding on the recipient. 15 (C) An unincorporated nonprofit association may charge a 16 person that makes a demand under this section reasonable copying 17 costs, limited to the costs of labor and materials. 18 (D) A former member or manager is entitled to information to 19 which the member or manager was entitled while a member or 20 manager if the information pertains to the period during which the 21 person was a member or manager, the former member or manager 22 seeks the information in good faith, and the former member or 23 manager satisfies subsections (A) through (C). 24 25 REPORTER’S COMMENTS 26 The act does not require a UNA to keep any books and records, 27 but if it does have them, they must be made available to the 28 members and managers pursuant to this section. The term books 29 and records is intended to cover all types and forms of data, 30 including electronic data. 31 32 Section 3333250. (A) Except as otherwise provided in 33 subsection (B), an unincorporated nonprofit association may not 34 pay dividends or make distributions to a member or manager. 35 (B) An unincorporated nonprofit association may: 36 (1) pay reasonable compensation or reimburse reasonable 37 expenses to a member or manager for services rendered; 38 (2) confer benefits on a member or manager in conformity 39 with its nonprofit purposes; 40 (3) repurchase a membership and repay a capital 41 contribution made by a member to the extent authorized by its 42 governing principles; or

[552] 29 1 (4) make distributions of property to members upon winding 2 up and termination to the extent permitted by Section 3333280. 3 4 REPORTER’S COMMENTS 5 1. A distribution by a UNA to members in violation of this 6 section would disqualify it from continuing to be a UNA. See 7 Section 333320. 8 2. The permitted distributions authorized by subsection (B) are 9 derived from Sections 6.40 and 6.41 of the Proposed Model 10 Nonprofit Corporation ActThird Edition (2008). 11 3. An action to recover improper distributions could be brought 12 by the UNA or by a member as a derivative action, if authorized 13 by state law. The Attorney General may also have authority under 14 state law to bring a disgorgement action. 15 16 Section 3333260. (A) Except as otherwise provided in the 17 governing principles, an unincorporated nonprofit association shall 18 reimburse a member or manager for authorized expenses 19 reasonably incurred in the course of the member’s or manager’s 20 activities on behalf of the association. 21 (B) An unincorporated nonprofit association may indemnify a 22 member or manager for any debt, obligation, or other liability 23 incurred in the course of the member’s or manager’s activities on 24 behalf of the association if the person seeking indemnification has 25 complied with Sections 3333170 and 3333220. Governing 26 principles in a record may broaden or limit indemnification. 27 (C) If a person is made or threatened to be made a party in an 28 action based on that person’s activities on behalf of an 29 unincorporated nonprofit association and the person makes a 30 request in a record to the association, a majority of the 31 disinterested managers may approve in a record advance payment, 32 or reimbursement, by the association, of all or a part of the 33 reasonable expenses, including attorney’s fees and costs, incurred 34 by the person before the final disposition of the proceeding. To be 35 entitled to an advance payment or reimbursement, the person must 36 state in a record that the person has a good faith belief that the 37 criteria for indemnification in subsection (B) have been satisfied 38 and that the person will repay the amounts advanced or reimbursed 39 if the criteria for payment have not been satisfied. The governing 40 principles in a record may broaden or limit the advance payments 41 or reimbursements. 42 (D) An unincorporated nonprofit association may purchase 43 insurance on behalf of a member or manager for liability asserted

[552] 30 1 against or incurred by the member or manager in the capacity of a 2 member or manager, whether or not the association has authority 3 under this chapter to reimburse, indemnify, or advance expenses 4 to the member or manager against the liability. 5 (E) The rights of reimbursement, indemnification, and 6 advancement of expenses under this section apply to a former 7 member or manager for an activity undertaken on behalf of the 8 unincorporated nonprofit association while a member or manager. 9 10 REPORTER’S COMMENTS 11 1. The rights to reimbursement of expenses (subsection (A)), 12 indemnification (subsection (B)) and advancement of litigation 13 expenses and attorneys’ fees (subsection (C))in business entity 14 statutes vary greatly from jurisdiction to jurisdiction. The rights of 15 reimbursement of expenses and indemnification in subsections (A) 16 and (B) are similar to that found in other business entity statutes. 17 See Uniform Limited Liability Company Act (2006) Section 408; 18 Model Nonprofit Corporation ActThird Edition (2008) Sections 19 8.508.58. The right to advancement of litigation expenses in 20 subsection (C) is derived from the Minnesota Nonprofit 21 Corporation Act MSA Section 317A.257. Many existing state 22 business entity statutes only allow reimbursement of litigation 23 expenses after the conclusion of the litigation and a finding of 24 nonliability. Given the fact that most members and managers of 25 UNAs are unpaid volunteers, the advancement of litigation 26 expenses on a discretionary basis authorized by subsection (C) 27 seems appropriate. 28 2. The right to reimbursement under subsection (A) is 29 mandatory, unless the governing principles otherwise provide. 30 The right to indemnification under subsection (B) is discretionary; 31 however, a UNA in a record (e.g., a writing of some kind, see 32 Section 333320(7), can broaden (e.g. make the right mandatory) or 33 limit (e.g. impose conditions beyond compliance with Sections 34 3333180 and 3333230) the right to indemnification. Advancement 35 of litigation expenses under subsection (C) is also discretionary but 36 in addition the request for an advancement, the commitment to 37 repay the amounts advanced if the criteria for payment have not 38 been satisfied, and the approval of an advancement must be in a 39 record. As is the case with indemnifications under subsection (B) 40 the governing principles of the UNA in a record may broaden or 41 further limit the advancement right. The discretionary nature of 42 both the rights of indemnification and advancement and the record 43 requirements for these rights are appropriate as default rules in

[552] 31 1 order to focus attention on the importance of these decisions. 2 After all many UNAs have very limited financial resources and the 3 first priority for their resources is to fulfill their nonprofit 4 purposes. 5 3. Directors and officers insurance and errors and omissions 6 insurance for managers of UNAs is expensive but because of 7 potential liability, directors and other managers of UNAs are 8 increasingly demanding that it be maintained on their behalf. 9 Subsection (D) makes it clear that the purchase of such insurance 10 is authorized. 11 4. Both current and former members and managers are eligible 12 for these rights of reimbursement, indemnification and 13 advancement of expenses. 14 15 Section 3333270. (A) An unincorporated nonprofit 16 association may be dissolved as follows: 17 (1) if the governing principles provide a time or method for 18 dissolution, at that time or by that method; 19 (2) if the governing principles do not provide a time or 20 method for dissolution, upon approval by the members; 21 (3) if no member can be located and the association’s 22 operations have been discontinued for at least three years, by the 23 managers or, if the association has no current manager, by its last 24 manager; 25 (4) by court order; or 26 (5) under law other than this chapter. 27 (B) After dissolution, an unincorporated nonprofit association 28 continues in existence until its activities have been wound up and 29 it is terminated pursuant to Section 3333280. 30 31 REPORTER’S COMMENTS 32 1. The vote required for dissolution under subsection (A)(2) 33 would be a majority vote of the members and under subsection (A) 34 (3) by a majority of the managers, unless the governing principles 35 require a higher vote. See Sections 3333160 and 3333220. 36 2. As a general rule, a court order dissolving a UNA would be 37 appropriate if (A)(1)(3) are inapplicable. It should also be 38 appropriate if it is impossible or impracticable to continue the 39 UNA, for example because of a deadlock or in other circumstances 40 where the doctrine of cypres is deemed to be applicable. 41 3. A UNA that is totally inactive and has no assets is de facto 42 dissolved, even though it is not de jure dissolved. Formal

[552] 32 1 dissolution (and winding up and termination under Section 2 3333280) is only necessary if the UNA has assets. 3 4 Section 3333280. Winding up and termination of an 5 unincorporated nonprofit association must proceed in accordance 6 with the following rules: 7 (1) All known debts and liabilities must be paid or adequately 8 provided for. 9 (2) Any property subject to a condition requiring return to the 10 person designated by the donor must be transferred to that person. 11 (3) Any property subject to a trust must be distributed in 12 accordance with the trust agreement. 13 (4) Any remaining property must be distributed as follows: 14 (a) as required by law other than this chapter that requires 15 assets of an association to be distributed to another person with 16 similar nonprofit purposes; 17 (b) in accordance with the association’s governing principles 18 or in the absence of applicable governing principles, to the 19 members of the association per capita or as the members direct; or 20 (c) if neither subitem (a) or (b) apply, pursuant to Chapter 21 18, Title 27. 22 23 REPORTER’S COMMENTS 24 1. This section sets out the rules for distribution of UNAs assets 25 after its affairs have been wound up. It is derived from the 26 California Unincorporated Nonprofit Association statute. See 27 Calif. Corp. Code Section 18410. 28 2. The state’s statutes of limitations will determine when an 29 action by a creditor to recover any assets distributed by a UNA 30 upon liquidation will be barred. Many business organization 31 statutes, however, have provisions that shorten the normal statutes 32 of limitations for known and unknown creditor claims when the 33 organization is liquidated. See Model Business Corporation Act, 34 Sections 14.06.07; Uniform Limited Liability Company Act, 35 (2006) Sections 70304. 36 37 Section 3333290. (A) In this section: 38 (1) ‘Entity’: 39 (a) means a person that has: 40 ( i) a legal existence separate from any person that has a 41 right to vote or consent with respect to any of the entity’s internal 42 affairs; or

[552] 33 1 (ii) the power to acquire an interest in real property in 2 its own name; and 3 (b) does not include: 4 ( i) an individual; 5 (ii) a trust with a predominantly donative purpose or a 6 charitable trust; 7 (iii) an association or relationship that is not a 8 partnership solely by reason of [Section 202(c) of the Uniform 9 Partnership Act (1997)] or a similar provision of the law of another 10 jurisdiction; 11 (iv) a decedent’s estate; or 12 (v) a government or a governmental subdivision, 13 agency, or instrumentality. 14 (2) ‘Merging entity’ means an entity that is a party to a 15 merger and exists immediately before the merger becomes 16 effective. 17 (3) ‘Organic rules’ means the public organic record and 18 private organic rules of an entity. 19 (4) ‘Private organic rules’ means the rules, whether or not in 20 a record, that govern the internal affairs of an entity, are binding on 21 all its equity owners or persons with the right to vote or consent 22 with respect to any of its internal affairs, and are not part of its 23 public organic record, if any. 24 (5) ‘Public organic record’ means the record the filing of 25 which by the Secretary of State forms an entity and any 26 amendment to or restatement of that record. 27 (6) ‘Surviving entity’ means the entity that continues in 28 existence after or is created by a merger. 29 (B) An unincorporated nonprofit association may be a merging 30 entity or surviving entity in a merger with any entity that is 31 authorized by law to merge with an unincorporated nonprofit 32 association. 33 (C) A merger involving an unincorporated nonprofit 34 association is subject to the following rules: 35 (1) Each constituent entity shall comply with its governing 36 law. 37 (2) Each party to the merger shall approve a plan of merger. 38 The plan, which must be in a record, must include the following 39 provisions: 40 (a) the name and form of each entity that is a party to the 41 merger;

[552] 34 1 (b) the name and form of the surviving entity and, if the 2 surviving organization is to be created by the merger, a statement 3 to that effect; 4 (c) if the surviving organization is to be created by the 5 merger, the surviving entity’s organic rules that are proposed to be 6 in a record; 7 (d) if the surviving entity is not to be created by the 8 merger, any amendments to be made by the merger to the 9 surviving entity’s organic rules that are, or are proposed to be, in a 10 record; and 11 (e) the terms and conditions of the merger, including the 12 manner and basis for converting the interests in each merging 13 entity into any combination of money, interests in the surviving 14 entity, and other consideration except that the plan of merger may 15 not permit members of an unincorporated nonprofit association to 16 receive merger consideration if a distribution of such consideration 17 would not be permitted in the absence of a merger under Sections 18 3333260 and 3333290. 19 (3) The plan of merger must be approved by the members of 20 each unincorporated nonprofit association that is a merging entity. 21 If a plan of merger would impose personal liability for an 22 obligation of an entity on a member of an association that is a 23 merging entity, the plan may not take effect unless it is approved 24 in a record by the member. 25 (4) Subject to the contractual rights of third parties, after a 26 plan of merger is approved and at any time before the merger is 27 effective, a merging entity may amend the plan or abandon the 28 merger as provided in the plan, or except as otherwise prohibited 29 in the plan, with the same consent as was required to approve the 30 plan. 31 (5) Following approval of the plan, a merger under this 32 section is effective: 33 (a) if a merging entity is required to give notice to or 34 obtain the approval of a governmental agency or officer in order to 35 be a party to a merger, when the notice has been given and the 36 approval has been obtained; and 37 (b) if the surviving entity: 38 (i) is an unincorporated nonprofit association, as 39 specified in the plan of merger and upon compliance by any 40 merging entity that is not an association with any requirements, 41 including any required filings in the Office of the Secretary of 42 State, of the entity’s governing statute; or

[552] 35 1 (ii) is not an unincorporated nonprofit association, as 2 provided by the statute governing the surviving entity. 3 (D) When a merger becomes effective: 4 (1) the surviving entity continues or comes into existence; 5 (2) each merging entity that is not the surviving entity ceases 6 to exist; 7 (3) all property of each merging entity vests in the surviving 8 entity without transfer, reversion, or impairment; 9 (4) all debts, obligations, or other liabilities of each merging 10 entity continue as debts, obligations, or other liabilities of the 11 surviving entity; 12 (5) the name of the surviving entity may be substituted for 13 the name of any merging entity that is a party to any pending 14 action or proceeding; 15 (6) except as otherwise provided by law other than this 16 chapter, all the rights, privileges, immunities, powers, and 17 purposes of each constituent merging entity vest in the surviving 18 entity; 19 (7) except as otherwise provided in the plan of merger, the 20 terms and conditions of the plan of merger take effect; 21 (8) the merger does not affect the personal liability, if any, 22 of a member or manager of a merging entity for a debt, obligation, 23 or other liability incurred before the merger is effective; and 24 (9) a surviving entity that is not organized in this State is 25 subject to the jurisdiction of the courts of this state to enforce any 26 debt, obligation, or other liability owed by a merging entity, if 27 before the merger the merging entity was subject to suit in this 28 State for the debt, obligation, or other liability. 29 (E) Property held for a charitable purpose under the law of this 30 State by a merging entity immediately before a merger under this 31 section becomes effective may not, as a result of the merger, be 32 diverted from the objects for which it was donated, granted or 33 devised, unless, to the extent required by or pursuant to the law of 34 this State concerning cy pres or other law dealing with 35 nondiversion of charitable assets, the entity obtains an appropriate 36 court order specifying the disposition of the property. 37 (F) A bequest, devise, gift, grant, or promise contained in a will 38 or other instrument of donation, subscription, or conveyance that is 39 made to a merging entity that is not the surviving entity and that 40 takes effect or remains payable after the merger inures to the 41 surviving entity. A trust obligation that would govern property if 42 transferred to the nonsurviving entity applies to property that is 43 transferred to the surviving entity under this section.

[552] 36 1 2 REPORTER’S COMMENTS 3 1. This section authorizes a UNA to merge into another UNA or 4 into another organization, assuming the law governing the other 5 organization authorizes a merger with a UNA; and then sets forth 6 the requirements for the merger—the plan of merger (subsection 7 (C)(2)); approval of the merger (subsections (C)(3) and (4)); 8 compliance with all applicable laws (subsections (C)(1) and (5); 9 and the legal effect of the merger (subsection (D)). The 10 requirements in this section are consistent with merger provisions 11 of other business entity laws. The Uniform Limited Liability Act 12 (2006) Sections 100109 were used as a guide with the following 13 modifications: (1) majority vs. unanimous vote for approval, and 14 (2) no filing required if all the entities involved are UNAs. 15 2. Subsections (E) and (F) prevent property held in trust or for 16 charitable purposes before the merger from being diverted from 17 purposes as a result of the merger. 18 19 Section 3333300. (A) If, before July 1, 2013, an interest in 20 property was by terms of a transfer purportedly transferred to an 21 unincorporated nonprofit association but under the law of this 22 State the interest did not vest in the association, or in one or more 23 persons on behalf of the association under subsection (B), on July 24 1, 2013, the interest vests in the association, unless the parties to 25 the transfer have treated the transfer as ineffective. 26 (B) If, before July 1, 2013, an interest in property was by terms 27 of a transfer purportedly transferred to an unincorporated nonprofit 28 association but the interest was vested in one or more persons to 29 hold the interest for members of the association, on or after July 1, 30 2013, the persons, or their successors in interest, may transfer the 31 interest to the association in its name, or the association may 32 require that the interest be transferred to it in its name. 33 34 REPORTER’S COMMENTS 35 1. Section 3333300 brings to fruition the parties’ expectations 36 that previous law frustrated. Inasmuch as the common law did not 37 consider an unincorporated nonprofit association to be a legal 38 entity, it could not acquire property. A gift of real or personal 39 property thus failed. Reference to the transfer as ‘purportedly’ 40 made identifies the document of transfer as one not effective under 41 the law. Subsection (A) gives effect to the gift. However, if 42 parties were informed about the common law they may have 43 treated the gift as ineffective. In that case, the final clause of

[552] 37 1 subsection (A) provides that the gift does not become effective 2 when this act takes effect. The unless clause would apply, for 3 example, if the residual beneficiaries of the donor’s will, knowing 4 that the devise of Blackacre to the nonprofit association was 5 ineffective under the law, continued to use Blackacre as their 6 summer home with the approval and acquiescence of members and 7 representatives of the nonprofit association. 8 2. Section 3333300 is not a retroactive rule. It applies to the 9 facts existing when this act takes effect. At that time subsection 10 (A) applies to a purported transfer of property that under the law of 11 the jurisdiction that could not be given effect at the time it was 12 made. The first alternative belatedly makes it effective effective 13 when this act takes effect and not when made. The practical result 14 of this difference is that when the purported transfer is effective, 15 the transfer is subject to interests in the property that came into 16 being in the interim. The nonprofit association’s interest is 17 subject, for example, to a tax or judgment lien that became 18 effective in the interim. An intervening transfer by the initial 19 transferor may simply be evidence that the ‘parties had treated the 20 transfer as ineffective.’ If so, Alternative 1 by its terms does not 21 vest ownership in the nonprofit association. 22 3. Some courts gave effect to a gift of property to an 23 unincorporated nonprofit association by determining that the gift 24 lodged title in someone, often officers of the association, to hold 25 the property in trust for the benefit of the association’s members. 26 Subsection (B) addresses this situation. When the act takes effect 27 it authorizes the fiduciary to transfer the property to the 28 association. If the fiduciary is unwilling or reluctant, the 29 association may require the fiduciary to transfer the property to the 30 association. In either case, the association will get a deed 31 transferring the property to it which, in the case of real property, 32 the association may record. 33 4. Jurisdictions that have a statute like New York’s concerning 34 grants of property by will have a problem that needs special 35 attention. The New York statute provides that a grant by will of 36 real or personal property to an unincorporated association is 37 effective only if the association incorporates within three years 38 after probate of the will. McKinney’s N.Y. Estates, Powers & 39 Trust Law section 31.3 (1991). The grants by will that need 40 attention are those that have not become effective by incorporation 41 of the association and have not become ineffective by the running 42 of the three year period. These grants seem entitled to the benefits

[552] 38 1 of Section 3333300. If so, some modification of Section 3333300 2 may be required. 3 4 Section 3333310. (A) An unincorporated nonprofit 5 association may deliver to the Secretary of State for filing a 6 statement appointing an agent authorized to receive service of 7 process. 8 (B) A statement appointing an agent must state: 9 (1) the name of the unincorporated nonprofit association; 10 and 11 (2) the name of the person in this State authorized to receive 12 service of process and the person’s address, including the street 13 address, in this State. 14 (C) A statement appointing an agent must be signed by a 15 person authorized to manage the affairs of the unincorporated 16 nonprofit association and by the person appointed as the agent. 17 The signing of the statement is an affirmation of fact that the 18 person is authorized to manage the affairs of the unincorporated 19 nonprofit association and that the agent has consented to serve. 20 (D) An amendment to or cancellation of a statement appointing 21 an agent to receive service of process must meet the requirements 22 for signing an original statement. An agent may resign by 23 delivering a resignation to the office of the Secretary of State for 24 filing and giving notice to the association. 25 (E) The Secretary of State may collect a fee for filing a 26 statement appointing an agent to receive service of process, an 27 amendment, a cancellation, or a resignation in the amount charged 28 for filing similar documents. 29 (F) A statement appointing an agent to receive service of 30 process takes effect on filing by the Secretary of State and is 31 effective for five years after the date of filing unless canceled or 32 terminated earlier. 33 (G) A statement appointing an agent to receive service of 34 process may not be rejected for filing because the name of the 35 unincorporated nonprofit association signing the statement is not 36 distinguishable on the records of the Secretary of State from the 37 name of another entity appearing in those records. The filing of 38 such a statement does not make the name of the unincorporated 39 nonprofit association signing the statement unavailable for use by 40 another entity. 41 42 REPORTER’S COMMENTS

[552] 39 1 1. This section authorizes but does not require, a nonprofit 2 association to file a statement authorizing an agent to receive 3 service of process. It is, of course, not the equivalent of filing 4 articles of incorporation. However, some nonprofit associations 5 may find it prudent to file. Filing may assure that the nonprofit 6 association’s management gets prompt notice of any lawsuit filed 7 against it. Also, depending upon the jurisdiction’s other laws, 8 filing gives some public notice of the nonprofit association’s 9 existence and its address. 10 2. Central filing with a state official is provided. This is where 11 interested parties will seek information of this kind and where such 12 appointments are commonly publicly filed. 13 3. The format of this section is very much like Section 333370, 14 which concerns a statement of authority with respect to property. 15 Because one requires local and other central filing they are not 16 combined. 17 18 Section 3333320. In applying and construing this uniform act, 19 consideration must be given to the need to promote uniformity of 20 the law with respect to its subject matter among states that enact it. 21 Section 3333330. This chapter modifies, limits, and supersedes 22 the federal Electronic Signatures in Global and National 23 Commerce Act, 15 U.S.C. section 7001, et seq., but does not 24 modify, limit, or supersede section 101(c) of that act, 15 U.S.C. 25 section 7001(c), or authorize electronic delivery of any of the 26 notices described in section 103(b) of that act, 15 U.S.C. section 27 7003(b).” 28 29 REPORTER’S COMMENTS 30 This section responds to specific language of the Electronic 31 Signatures in Global and National Commerce Act and is designed 32 to avoid preemption of state law under that federal legislation. 33 34 SECTION 2. The repeal or amendment by this act of any law, 35 whether temporary or permanent or civil or criminal, does not 36 affect pending actions, rights, duties, or liabilities founded thereon, 37 or alter, discharge, release or extinguish any penalty, forfeiture, or 38 liability incurred under the repealed or amended law, unless the 39 repealed or amended provision shall so expressly provide. After 40 the effective date of this act, all laws repealed or amended by this 41 act must be taken and treated as remaining in full force and effect 42 for the purpose of sustaining any pending or vested right, civil 43 action, special proceeding, criminal prosecution, or appeal existing

[552] 40 1 as of the effective date of this act, and for the enforcement of 2 rights, duties, penalties, forfeitures, and liabilities as they stood 3 under the repealed or amended laws. 4 5 SECTION 3. This act takes effect July 1, 2013. 6 XX 7

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