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  1. #1
    Join Date
    May 2018
    Location
    Iowa
    Posts
    2

    Default Using By-Laws to Claim Ownership of Non-Profit Corporation Assets

    My question involves business law in the state of: Iowa

    Can a defendant claim ownership of corporate assets of an Iowa nonprofit corporation that was organized (As stated in the Iowa Nonprofit Articles of Incorporation) under the Iowa Nonprofit Corporation Act, Chapter 504A of the Code of Iowa (1999) and within the meaning of Section 501(c)(3) of the IRS code of 1986 by making the claim within the revised by-laws at a later date?

    The claim in the by-laws is stating that should the corporation dissolve, the members of the board of the corporation shall receive an equal share of all assets.

    Is this legal?

    If it is not, what possible legal ramifications might exist in a lawsuit dispute over corporate assets with such a statement in the by-laws?

    Also, if illegal, could such a statement be used a evidence in a lawsuit to show mal-intent regarding the founding of the corporation or at the time the by-laws were revised, particularly when other legal claims against this defendant are stated in the Petition against the Plaintiff.

    I look forward to your answers.

    Thanks.

  2. #2
    Join Date
    Mar 2013
    Posts
    16,671

    Default Re: Using By-Laws to Claim Ownership of Non-Profit Corporation Assets

    Give us the back story. You show yourself as the plaintiff. Who are you in this case? Who is the defendant? Why are you suing the defendant? What do you and the defendant hope to gain by this litigation?

  3. #3
    Join Date
    Jul 2018
    Posts
    1,070

    Default Re: Using By-Laws to Claim Ownership of Non-Profit Corporation Assets

    Quote Quoting theplaintiff
    View Post
    The claim in the by-laws is stating that should the corporation dissolve, the members of the board of the corporation shall receive an equal share of all assets.

    Is this legal?
    I don't really understand the question. Is it legal for the underlined language in your post to appear in the by-laws? Sure it is. Is it illegal for some person to make a claim based on that language. I can't imagine why it wouldn't be.

  4. #4
    Join Date
    Oct 2014
    Posts
    7,088

    Default Re: Using By-Laws to Claim Ownership of Non-Profit Corporation Assets

    Quote Quoting theplaintiff
    View Post
    The claim in the by-laws is stating that should the corporation dissolve, the members of the board of the corporation shall receive an equal share of all assets.

    Is this legal?
    I will tell you that a provision in the charter or by-laws of the organization that provides that the members get the assets upon dissolution of the organization violates the requirements to be tax exempt under Internal Revenue Code (IRC) 501(c)(3). The organization's documents must provide that upon dissolution that the organizations assets would go to another organization exempt under IRC 501(c)(3). So the provision that the assets go to the members, if it is in your organization's charter or by-laws is a problem as that would mean that the organization is disqualified as a tax exempt organization. The organization ought to see a tax attorney who practices in the area of exempt organizations for advice on that.

    How that would impact the defendant's claims, however, I cannot say without knowing all the facts of what is going on here.

  5. #5
    Join Date
    May 2018
    Location
    Iowa
    Posts
    2

    Default Re: Using By-Laws to Claim Ownership of Non-Profit Corporation Assets

    I appreciate your answers. Taxing Matters answered my primary question. This case is highly complicated and is difficult to present many of the details at this moment. I will remember to give more information the next time I ask a question in this forum. Thanks again for your input.

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