You are here

Must civic board and foundation board be separate?

Your Legal Questions Answered

Must civic board and foundation board be separate?

I belong to a 501(c)(4) community association that has a separate 501(c)(3) charitable foundation to support our charitable programs. We are being told that the boards must be separate with either no overlapping members or a small percentage of overlap. I cannot find anything that addresses this. Can you help?

I suspect that the reason you can’t find anything on this is because it isn’t true. Unless there is something in the rules of the national organization to which you belong, there is no legal requirement that the boards of a civic association and its foundation be entirely separate. The concern for being separate probably comes from concern about “piercing the corporate veil” if the operating organization incurs a significant liability and the claimant wants to argue that the funds of the foundation are available to make the payment. Having different individuals on the boards of the organizations helps prove their separateness. But even an entirely overlapping board does not per se mean that the organizations are one. (See Ready Reference Page: “How to Prevent Piercing the Corporate Veil”)
 
The (c)(4) probably wants to control the (c)(3) so the structure should provide that it has the power to appoint -- and remove -- the directors of the (c)(3).
Wednesday, April 7, 2010
Keywords: 

Sign-up for our free weekly Q&A

Add new comment

Sign-up for our weekly Q&A; get a free report on electioneering