Is a 501(c) organization allowed to sell property and finance the loan and charge interest?
Full Question:
Answer:
The following are Georgia statutes:
14-3-302. Every corporation has perpetual duration and succession in its
corporate....
Every corporation has perpetual duration and succession in its
corporate name, unless its articles of incorporation adopted on or after
April 1, 1969, or in the case of a corporation existing prior to or on
April 1, 1969, an amendment thereto adopted on or after April 1, 1969,
provides otherwise. Unless its articles of incorporation provide
otherwise, every corporation has the same powers as an individual to do
all things necessary or convenient to carry out its business and
affairs, including without limitation power:
(1) To sue, be sued, complain, and defend in its corporate name;
(2) To have a corporate seal, which may be altered at will, and to use
it, or a facsimile of it, by impressing or affixing or in any other manner
reproducing it;
(3) To make and amend bylaws, not inconsistent with its articles of
incorporation or with the laws of this state, for regulating and managing
the affairs of the corporation;
(4) To purchase, receive, lease, or otherwise acquire, own, hold,
improve, use, and otherwise deal with real or personal property or any
legal or equitable interest in property, wherever located;
(5) To sell, convey, mortgage, pledge, lease, exchange, and otherwise
dispose of all or any part of its property;
(6) To purchase, receive, subscribe for, or otherwise acquire, own, hold,
vote, use, sell, mortgage, lend, pledge, or otherwise dispose of, and deal
in and with shares or other interests in, or obligations of, any entity;
(7) To make contracts and guaranties, incur liabilities, borrow money,
issue notes, bonds, and other obligations, and secure any of its
obligations by mortgage or pledge of any of its property, franchises, or
income;
(8) To lend money, invest and reinvest its funds, and receive and hold
real and personal property as security for repayment, except as limited by
Code Sections 14-3-860 through 14-3-864;
(9) To be a promoter, fiduciary, shareholder, partner, member, associate,
or manager of any partnership, joint venture, trust, or other entity;
(10) To conduct its activities, locate offices, and exercise the powers
granted by this chapter within or without this state;
(11) To elect or appoint directors, officers, delegates, employees, and
agents of the corporation, define their duties, fix their compensation, and
lend them money and credit;
(12) To pay pensions and establish pension plans, pension trusts, and
other benefit and incentive plans for any or all of its current or former
directors, officers, employees, and agents;
(13) To make donations not inconsistent with law for the public welfare
or for charitable, religious, scientific, or educational purposes and for
other purposes that further the corporate interest;
(14) To impose dues, assessments, admission fees, and transfer fees upon
its members;
(15) To provide insurance for its benefit on the life or physical or
mental ability of any of its directors, officers, or employees or any other
person whose death or physical or mental disability might cause financial
loss to the corporation; or, pursuant to any contract obligating the
corporation, as part of compensation arrangements, or pursuant to any
contract obligating the corporation as guarantor or surety, on the life of
the principal obligor, and for these purposes the corporation is deemed to
have an insurable interest in such persons;
(16) To establish conditions for admission of members, admit members, and
issue memberships;
(17) To carry on a business; and
(18) To do all things necessary or convenient, not inconsistent with law,
to further the activities and affairs of the corporation.
14-3-860. As used in this part, the term:
As used in this part, the term:
(1) "Conflicting interest" with respect to a corporation means the
interest a director of the corporation has respecting a transaction
effected or proposed to be effected by the corporation (or by a subsidiary
of the corporation or any other entity in which the corporation has a
controlling interest) if:
(A) Whether or not the transaction is brought before the board of
directors of the corporation for action, to the knowledge of the director
at the time of commitment the director or a related person is a party to
the transaction or has a beneficial financial interest in or so closely
linked to the transaction and of such financial significance to the
director or a related person that it would reasonably be expected to exert
an influence on the director's judgment if the director were called upon to
vote on the transaction; or
(B) The transaction is brought (or is of such character and significance
to the corporation that it would in the normal course be brought) before
the board of directors of the corporation for action, and to the knowledge
of the director at the time of commitment any of the following persons is
either a party to the transaction or has a beneficial financial interest so
closely linked to the transaction and of such financial significance to
that person that it would reasonably be expected to exert an influence on
the director's judgment if the director were called upon to vote on the
transaction: (i) an entity (other than the corporation) of which the
director is a director, general partner, agent, or employee; (ii) a person
that controls one or more of the entities specified in division (i) of this
subparagraph or an entity that is controlled by, or is under common control
with, one or more of the entities specified in division (i) of this
subparagraph; or (iii) an individual who is a general partner, principal,
or employer of the director.
(2) "Director's conflicting interest transaction" with respect to a
corporation means a transaction effected or proposed to be effected by the
corporation (or by a subsidiary of the corporation or any other entity in
which the corporation has a controlling interest) respecting which a
director of the corporation has a conflicting interest.
(3) "Related person" of a director means:
(A) The spouse (or a parent or sibling thereof) of the director or a
child, grandchild, sibling, parent (or spouse of any thereof), or an
individual having the same home as the director, or a trust or estate of
which an individual specified in this subparagraph is a substantial
beneficiary; or
(B) A trust, estate, incompetent, conservatee, or minor of which the
director is a fiduciary.
(4) "Required disclosure" means disclosure by the director who has a
conflicting interest of (A) the existence and nature of the director's
conflicting interest, and (B) all facts known to the director respecting
the subject matter of the transaction that an ordinarily prudent person
would reasonably believe to be material to a judgment as to whether or not
to proceed with the transaction.
(5) "Time of commitment" respecting a transaction means the time when the
transaction is consummated or, if made pursuant to contract, the time when
the corporation (or its subsidiary or the entity in which it has a
controlling interest) becomes contractually obligated so that its
unilateral withdrawal from the transaction would entail significant loss,
liability, or other damage.
14-3-861. (a) A transaction effected or proposed to be effected by a
corporation....
(a) A transaction effected or proposed to be effected by a corporation
(or by a subsidiary of the corporation or by any other entity in which
the corporation has a controlling interest) that is not a director's
conflicting interest transaction may not be enjoined, set aside, or give
rise to an award of damages or other sanctions, in an action under the
laws of this state by a member or by or in the right of the corporation
or any other person who otherwise has standing, on the ground of an
interest in the transaction of a director or any person with whom or
which he or she has a personal, economic, or other association.
(b) A director's conflicting interest transaction may not be enjoined,
set aside, or give rise to an award of damages or other sanctions, in
an action under the laws of this state by a member or by or in the right
of the corporation or any other person who otherwise has standing, on
the ground of an interest in the transaction of the director or any
person with whom or which he or she has a personal, economic, or other
association, if:
(1) Directors' action respecting the transaction was at any time taken
in compliance with Code Section 14-3-862;
(2) Members' action respecting the transaction was at any time taken
in compliance with Code Section 14-3-863;
(3) Action by the superior court respecting the transaction was at any
time taken in compliance with Code Section 14-3-864; or
(4) The transaction, judged in the circumstances at the time of
commitment, is established to have been fair to the corporation.
14-3-862. (a) Directors' action respecting a transaction is effective
for....
(a) Directors' action respecting a transaction is effective for
purposes of paragraph (1) of subsection (b) of Code Section 14-3-861 if
the transaction received the affirmative vote of a majority (but not
less than two) of those qualified directors on the board of directors
or on a duly empowered committee thereof who voted on the transaction
after either required disclosure to them (to the extent the information
was not known by them) or compliance with subsection (b) of this Code
section.
(b) If a director has a conflicting interest respecting a transaction,
but neither he or she nor a related person of the director specified in
subparagraph (A) of paragraph (3) of Code Section 14-3-860 is a party
thereto, and if the director has a duty under law or professional canon,
or a duty of confidentiality to another person, respecting information
relating to the transaction such that the director cannot, consistent
with that duty, make the disclosure contemplated by subparagraph (B) of
paragraph (4) of Code Section 14-3-860, then disclosure is sufficient for
purposes of subsection (a) of this Code section if the director:
(1) Discloses to the directors voting on the transaction the existence
and nature of his or her conflicting interest and informs them of the
character of and limitations imposed by that duty prior to their vote
on the transaction; and
(2) Plays no part, directly or indirectly, in their deliberations or
vote.
(c) A majority (but not less than two) of all the qualified directors
on the board of directors, or on the committee, constitutes a quorum
for purposes of action that complies with this Code section. Directors'
action that otherwise complies with this Code section is not affected
by the presence or vote of a director who is not a qualified director.
(d) For purposes of this Code section, "qualified director" means, with
respect to a director's conflicting interest transaction, any director
who does not have either (1) a conflicting interest respecting the
transaction or (2) a familial, financial, professional, or employment
relationship with a second director who does have a conflicting interest
respecting the transaction, which relationship would, in the
circumstances, reasonably be expected to exert an influence on the first
director's judgment when voting on the transaction.
14-3-863. (a) Members' action respecting a transaction is effective for
purposes....
(a) Members' action respecting a transaction is effective for purposes
of paragraph (2) of subsection (b) of Code Section 14-3-861 if a
majority of the votes entitled to be cast by all qualified members were
cast in favor of the transaction after (1) notice to members describing
the director's conflicting interest transaction, (2) provision of the
information referred to in subsection (d) of this Code section, and
(3) required disclosure to the members who voted on the transaction (to
the extent the information was not known by them).
(b) For purposes of this Code section, "qualified members" means any
members entitled to vote with respect to a director's conflicting
interest transaction except the director and members that, to the
knowledge, before the vote, of the secretary (or other officer or agent
of the corporation authorized to tabulate votes) are a related person
of the director.
(c) A majority of the votes entitled to be cast by all qualified
members constitutes a quorum for purposes of action that complies with
this Code section. Subject to the provisions of subsection (d) of this
Code section, members' action that otherwise complies with this Code
section is not affected by the presence of, or the voting by, members
that are not qualified members.
(d) For purposes of compliance with subsection (a) of this Code
section, a director who has a conflicting interest respecting the
transaction shall, before the members' vote, inform the secretary (or
other officer or agent of the corporation authorized to tabulate votes)
of the identity of all members that to the knowledge of the director
are related persons of the director.
(e) If a members' vote does not comply with subsection (a) of this
Code section solely because of a failure of a director to comply with
subsection (d) of this Code section, and if the director establishes
that this failure did not determine and was not intended by him or her
to influence the outcome of the vote, the court may, with or without
further proceedings respecting paragraph (3) of subsection (b) of Code
Section 14-3-861, take such action respecting the transaction and the
director, and give such effect, if any, to the members' vote, as it
considers appropriate in the circumstances.
14-3-864. In a case involving a corporation described in paragraph (2)
of....
In a case involving a corporation described in paragraph (2) of
subsection (a) of Code Section 14-3-1302, a transaction that was not the
subject of either directors' action under Code Section 14-3-862 or
members' action under Code Section 14-3-863 is effective for purposes of
paragraph (3) subsection (b) of Code Section 14-3-861 if the transaction
is approved by the superior court, in an action in which the Attorney
General is joined as a party.
14-3-1201. Unless otherwise provided by this chapter, the articles, or
bylaws, a....
Unless otherwise provided by this chapter, the articles, or bylaws, a
corporation may on the terms and conditions, for the consideration
determined by the board of directors, and without the approval of the
members or any other person:
(1) Sell, lease, exchange, or otherwise dispose of all, or substantially
all, of its property in the usual and regular course of its activities; or
(2) Mortgage, pledge, dedicate to the repayment of indebtedness (whether
with or without recourse), or otherwise encumber any or all of its property
whether or not in the usual and regular course of its activities.
14-3-1202. (a) A corporation may sell, lease, exchange, or otherwise
dispose of all,....
(a) A corporation may sell, lease, exchange, or otherwise dispose of all,
or substantially all, of its property (with or without the good will) other
than in the usual and regular course of its activities on the terms and
conditions and for the consideration determined by the corporation's board
if the proposed transaction is authorized by subsection (b) of this Code
section.
(b) Unless this chapter, the articles, the bylaws, or the board of
directors or members (acting pursuant to subsection (d) of this Code
section) require a greater vote or voting by class, the proposed
transaction to be authorized must be approved:
(1) By the board;
(2) By the members by two-thirds of the votes cast or a majority of the
voting power, whichever is less; and
(3) In writing by any person or persons whose approval is required by a
provision of the articles authorized by Code Section 14-3-1030 for an
amendment to the articles or bylaws.
(c) If the corporation does not have members, the transaction must be
approved by a vote of a majority of the directors in office at the time the
transaction is approved. In addition, the corporation shall provide notice
of any directors' meeting at which such approval is to be obtained in
accordance with subsection (b) of Code Section 14-3-822. The notice must
also state that the purpose, or one of the purposes, of the meeting is to
consider the sale, lease, exchange, or other disposition of all, or
substantially all, of the property or assets of the corporation and contain
or be accompanied by a copy or summary of a description of the transaction.
(d) The board may condition its submission of the proposed transaction,
and the members may condition their approval of the transaction, on receipt
of a higher percentage of affirmative votes or on any other basis.
(e) If the corporation seeks to have the transaction approved by the
members at a membership meeting, the corporation shall give notice to its
members of the proposed membership meeting in accordance with Code
Section 14-3-705. The notice must also state that the purpose, or one of
the purposes, of the meeting is to consider the sale, lease, exchange, or
other disposition of all, or substantially all, of the property or assets
of the corporation and contain or be accompanied by a copy or summary of a
description of the transaction.
(f) If the board needs to have the transaction approved by the members by
written consent or written ballot, the material soliciting the approval
shall contain or be accompanied by a copy or summary of a description of
the transaction.
(g) A corporation described in paragraph (2) of subsection (a) of Code
Section 14-3-1302 must give written notice to the Attorney General 30 days
before it sells, leases, exchanges, or otherwise disposes of all, or
substantially all, of its property if the transaction is not in the usual
and regular course of its activities, unless said transaction is with
another corporation described in paragraph (2) of subsection (a) of Code
Section 14-3-1302.
(h) After a sale, lease, exchange, or other disposition of property is
authorized, the transaction may be abandoned, subject to any contractual
rights, without further action by the members or any other person who
approved the transaction in accordance with the procedure set forth in the
resolution proposing the transaction or, if none is set forth, in the
manner determined by the board of directors.
14-3-1701. (a) Subject to the limitations of subsection (b) of this Code
section,....
(a) Subject to the limitations of subsection (b) of this Code section,
this chapter shall apply:
(1) To all nonprofit corporations, existing on or formed after
July 1, 1991, including nonprofit corporations organized under any
prior general corporation law of this state or under Chapter 3 of
Title 14 of the Official Code of Georgia Annotated in effect prior to
July 1, 1991, that is repealed by this chapter;
(2) To all nonprofit corporations created by special Act of the
General Assembly as to which power has been reserved to withdraw the
franchise;
(3) To any nonprofit corporation, organization, or association, to the
extent that the former general corporation law of this state or any of
its provisions or this chapter or any of its provisions specifically
have been or shall be made applicable to such corporation, organization,
or association; and
(4) To any corporation organized under any statute of this state or if
it were originally created by special Act of the General Assembly without
reservation of power to withdraw the franchise, if under any prior
general corporation law of this state applicable to nonprofit
corporations such corporation either has amended its charter or has been
a party to a merger or a consolidation, and also to any such corporation
which after July 1, 1991, in an amendment to its articles of
incorporation or restatement of the articles of incorporation or in a
merger or a consolidation, elects to be subject to this chapter. Any such
corporation shall have all the rights, privileges, franchises,
immunities, and powers and shall be subject to all the duties,
liabilities, and disabilities of a corporation to which this chapter
applies as well as of the statute or special Act by which such corporation
was originally created; but in the event of a conflict between such
statute or special Act and this chapter, such statute or special Act
shall govern.
(b) This chapter shall not apply:
(1) To corporations organized under a statute of this state other than
either this chapter or any prior general corporation law, except to the
extent that the former general corporation law of this state applicable
to nonprofit corporations or any of its provisions or this chapter or any
of its provisions specifically have been or shall be made applicable to
such corporations;
(2) To any corporation originally created by special Act of the
General Assembly as to which power has not been reserved to withdraw
the franchise, except as otherwise provided in subsection (a) of this
Code section;
(3) To any corporation originally created by special Act of the General
Assembly as to which power has been reserved to withdraw the franchise,
if the purpose of the corporation would require its organization to take
place under a statute other than this chapter, if it were being organized
after July 1, 1991, except to the extent that the former general
corporation law of this state or any of its provisions or this chapter or
any of its provisions specifically have been or shall be made applicable
to corporations organized for that purpose;
(4) To any public authority created by special Act of the General
Assembly, except to the extent that the former general corporation law
of this state or any of its provisions or this chapter or any of its
provisions specifically have been or shall be made applicable to such
public authority; or
(5) To corporations of any class to the extent that such class is
specifically exempted from this chapter or any of its provisions.
(c) This chapter shall not impair the existence of any nonprofit
corporation existing on July 1, 1991. Subject to Code Section 14-3-610,
any such existing corporation to which this chapter is applicable and its
members, directors, and officers shall have the same rights and be
subject to the same limitations, restrictions, liabilities, and penalties
as a corporation formed under this chapter and its members, directors,
and officers.
(d) If the articles of incorporation, charter, or bylaws of a
corporation in existence on July 1, 1991, contain any provisions that
were not authorized or permitted by the prior general corporation law of
this state but which are authorized or permitted by this chapter, the
provisions of the articles of incorporation, charter, or bylaws shall be
valid on and from that date, and action may be taken on and from that
date in reliance on those provisions. If the articles of incorporation,
charter, or bylaws of a corporation in existence on July 1, 1991, contain
any provisions that were authorized or permitted by the prior nonprofit
corporation law of this state, that were validly adopted under the law in
effect at the time of their adoption, and that are authorized or
permitted by this chapter, the provisions of the articles of
incorporation, charter, or bylaws shall continue to be valid on and from
that date, whether or not this chapter imposes requirements for the
adoption of such provisions that are different from those in effect at
the time the provisions were adopted.
(e) This chapter shall apply to commerce with foreign nations and among
the several states only insofar as the application may be permitted under
the Constitution and laws of the United States.
