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Who should sign contract between organization and CEO?

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Who should sign contract between organization and CEO?

I am a founder and current CEO of a public charity. I developed and own the copyright to a software product that drives the website of the organization.  The company is now being reorganized and we have a new CEO and new board. To protect my intellectual property, I have to draw an intellectual property agreement with the company before the new board takes control of the company. Does this mean that I will be signing the contract between me as a developer and myself as the current president of the company?

No.  As a public charity, you probably have a conflict of interest policy that prohibits you from participating in a contractual negotiation or signing a contract on behalf of the organization if you have a personal interest in the situation.  (See Ready Reference Page:  “Conflict of Interest Policies Help Avoid Problems”)  A few states legally require a conflict policy.  Since the IRS asks whether you have one on the Form 990 tax information return, it has established a de facto presumption that it is a necessary practice.

You should negotiate on your own behalf with some other authorized — and independent — officer or committee of the organization, both to avoid the impression of a conflict and the possibility of an excess benefit.  As a “disqualified person” with respect to the organization, you can be subject to the excess benefit tax if you receive more from the organization than you give in return.  You can obtain a rebuttable presumption that the transaction is fair and reasonable by following the “safe harbor” requirements of the Regulations, which require the decision to be made by an independent group on the board after review of comparable situations and memorializing the decision.  (See Ready Reference Page: “Charities Must Avoid Excess Benefit Transactions”)

Wednesday, January 2, 2019

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