Charitable Board Member Responsibilities
Charitable boards serve as the first line of defense in overseeing the proper administration of charitable assets in the Commonwealth. It is because of the selfless dedication of individuals that serve on these boards that over 25,000 charitable organizations are able to contribute to and strengthen communities across Massachusetts. In their role as board members and trustees, individuals undertake an obligation to work in the best interest of the charity and in doing so subject themselves to the fiduciary duties of care and loyalty. To support this work, we offer the AGO Guide for Board Members of Charitable Organizations and encourage charitable boards to consider best practices that can strengthen their organization and enhance their operations.
Transfer of Charitable Assets
As a charitable nonprofit organization’s board of directors or trustees reviews the organization’s financial health, which it should do on a regular basis, the board may conclude that a sale of underutilized assets is a good way to generate cash to support and enhance other aspects of the organization’s charitable mission. The board may also determine that it is in the organization’s best interest to sell its assets and dissolve. Further, the board may determine that it is appropriate for the charity to transfer a large part of its assets to another charity in exchange for consideration that is less than fair value.
All members of the board have a fiduciary duty to the organization to ensure that they are being responsible fiscal stewards. When transferring charitable assets, such responsible stewardship may require the provision of notice of the proposed transaction to the Attorney General’s Non-Profit Organizations/Public Charities Division (the “Division”). Responsible stewardship may also require that the charity seek and obtain court approval before executing the transaction and/or obtaining court approval. Thus, before transferring charitable assets, the charity, its board, and its counsel should review the guidelines found in this section of the website, and determine whether the proposed transaction requires notice to the Division and/or court approval:
- G.L. c. 180, § 8A. If a charity intends to sell all or substantially all of its assets, G.L. c. 180, § 8A(c) may require that the charity provide notice of the transaction to the Attorney General. Please review these guidelines before consummating such a transaction.
- Massachusetts Charitable Mechanic Association v. Beede, 320 Mass. 601 (1947). If a charity intends to transfer a large portion of its assets for less than fair value, the Supreme Judicial Court’s decision in Massachusetts Charitable Mechanic Association v. Beede, 320 Mass. 601 (1947) may require that the charity obtain court approval before consummating the transaction. Please review these guidelines before consummating such a transaction.
If you still have questions after reviewing this guidance, please do not hesitate to contact the Division at email@example.com or 617-963-2101.
Administrative Modification of Institutional Funds
Pursuant to the Uniform Prudent Management of Institutional Funds Act ("UPMIFA"), M.G.L. ch. 180A, § 5(d), the Supreme Judicial Court issued S.J.C. Rule 1:23. This Rule permits an institution seeking to modify certain restrictions of an institutional fund that has been in existence for twenty (20) years or longer and has a total value of seventy-five thousand dollars ($75,000) or less as of the end of its last fiscal year to do so without petitioning the court for relief if the institution obtains the consent of the Attorney General. In such an event, the institution may apply to the Attorney General for consent to either:
- Modify a restriction contained in a gift instrument on the management, investment, or duration of the institutional fund (administrative equitable deviation); or
- Modify the purpose of the institutional fund or the restriction on the use of the fund in a manner consistent with the charitable purposes expressed in the gift instrument if a particular charitable purpose or a restriction contained in a gift instrument on the use of an institutional fund has become unlawful, impracticable, impossible to achieve or wasteful (administrative cy pres).
In response to S.J.C. Rule 1:23, the Division has implemented a procedure for reviewing requests to modify institutional funds that have been in existence for at least twenty (20) years and have a total value of seventy-five thousand ($75,000) dollars or less.
Please see the links to the Form PC-IF and the Instructions to the Form PC-IF provided below.
Mergers and Consolidations of Public Charities
If a Massachusetts nonprofit charitable organization (a “public charity”) is considering merging or consolidating, review the information below about the steps to take and the documentation that needs to be filed.
For a variety of reasons, a public charity may consider merging or consolidating with another charity. While the AGO cannot provide legal advice to organizations considering this change, the proper documentation must be sent to the Non-Profit Organizations/ Public Charities Division after it is finalized. The following information for mergers or consolidations of public charities is intended to outline the steps and appropriate documentation the AGO requires. For questions, contact the AGO at (617) 963-2101, or by email at firstname.lastname@example.org. Information regarding the requirements of the Secretary of the Commonwealth is available on the Secretary’s website.
Steps to take
When a public charity merges or consolidates with another corporation, there are several steps that must be followed in order to assure that the reorganization is appropriately conducted and fully documented with the AGO's Non-Profit Organizations/Public Charities Division. Most importantly, if a Massachusetts public charity merges or consolidates then the surviving corporation must also be a public charity governed by the same rules and regulations.
Before the Merger or Consolidation
Prior to the merger or consolidation:
- Review M.G.L. c. 180, s. 10, to assure that the merger or consolidation will be conducted in accordance with its provisions.
- Review M.G.L. c. 12, s. 8E and 8F to assure that each merging or consolidating corporation that is a public charity is both registered with, and in compliance with its reporting obligations to, the AGO. If necessary, a public charity's compliance can be confirmed by calling the AGO at (617) 727-2101.
After the Merger or Consolidation
Subsequent to the merger or consolidation:
- Provide the AGO with a copy of the articles of merger or articles of consolidation, as filed with the Secretary of State, within 30 days of such filing.
Note that the surviving corporation, as a public charity, is required to continue to file annual financial reports with the AGO. The AGO's records will note as "deactivated" those corporations that do not survive the merger or consolidation.