Nonprofit Legal ReviewStep One Of An Effective

Risk Management Program

Robert J. WeilLaw Office of Robert J. Weil, PLLC

4031 University Drive, Suite 100Fairfax, Virginia 22030

(703) 934 2036 O(703) 277 7730 F(703) 399 5671 Cbob@rweillaw.com

Why Nonprofits Need A Legal Review

• Reduced third party liability exposure• Reduced risk of fraud / embezzlement• More effective and efficient management• Protection of non-profit assets• Evidence of leadership due diligence• Education of organization’s professional and

volunteer (board) leadership• A more restful night’s sleep for leadership

Corporate RecordsLegally Operative Documents for Review

• Articles of Incorporation (confirm status and registered agent)

• Articles of Amendment• Bylaws/Constitutions• IRS Determination Letter• Administrative Policies and Procedures• Minutes• Employee Handbooks or Manuals• Governance Code of Ethics• Association policies: conflict of interest (with

annual disclosure form); document retention; whistleblower, gift acceptance; antitrust compliance)

Affiliated Organizations• Foundations: Independent 509(a)(1) or

509(a)2)organization;• 509(a)3) supporting organization – interlocking

boards – receiving greater IRS scrutiny• Differences in level of control

• Chapters – Individual or Group Exemption • Subject to enforceable chapter agreements or

charters – impacts level of parent control• An enforceable contract addresses reporting

requirements, financial matters and use of the parent’s name and IP

• Separately incorporated chapters

Policies and ProceduresEmployee Handbook

• Does the organization have one?• Is it followed? Is it periodically updated?• Does it confirm employment at will and avoid

creating a contract of employment (Virginia)?• Nondiscrimination Policy• Sexual Harassment Policy• Employee sign off• Identification of employee benefits • Compliance with both Federal and State statutes

Intellectual Property

Trade, service and certification marks:• PTO registration ®• TM or SM• Diary critical dates for affidavits of continued use

(5-6 year) or renewal (10 years)

• Copyrights – Proper noticeCopyright© 2011 Association Name, Date. All Rights Reserved• Publications and website content – thorough

disclaimers• Protection of membership lists

InsuranceDirectors and Officers Liability Insurance• Scope of coverage – no coverage for injuries to

persons or property damage• Inclusion of affiliated entities • Essential coverage – EPL, Libel/Slander, Anti-

competitive practices, infringement

Errors and Omissions Coverage

Commercial Property and Liability Insurance• Required as an additional layer beyond D&O to

protect for personal injury and property loss

Event Cancellation Coverage – Don’t overlookCertificates of Insurance - Frequently ignored

Lobbying DisclosuresIn House Lobbyist v. Outside Contract Lobbyist• Quarterly and semi-annual reporting for in-house

lobbyists• Heavy fines for a knowing failure to file• Organizations employing in-house lobbyists file a

single registration – Exempt from registration if total expenses for lobbying activities do not exceed $11,500 during a quarterly period

• Lobbying firms are required to file a separate registration for each client – exempt from registration if total income from client not in excess of $3,000 during a quarterly period

Commercial Property and Equipment Leases

Commercial Lease• Term of Lease• Escalation Clauses for rent, operating

costs• Events of Default – What are they?• Ability to assign or sublease

Subleases • Approval of form by Landlord

Equipment Leases• Personal guarantees – NO!

ContractsVendors

• Management services, software, event planning, publishing, website development and maintenance, equipment, and marketing

• Publishing and printing agreements• Professional Services: CPA’s, Attorneys, Lobbyists• Review contract term or length• Clearly define Scope of Services• Ownership of IP• Confidentiality• Insurance and Indemnification language• Independent Contractor/Consultant Agreements

Other RisksClient Website• Proper disclaimer of liability for content• Terms and Conditions of Use• Privacy Policy• Referral Programs• Listserv and discussion forum guidelines as part

of a broader Social Media Policy Certification/Accreditation Programs• Certification vs. Certificate programs• What is accreditation?• What is licensure?• Risks of Certification• Protecting against liability exposures

Educating Officers and Directors• Duties and responsibilities• Due Diligence – Act in best interests of

the organization• Fiduciary obligations• Conflicts of Interest and need for

disclosure• Corporate Opportunity Doctrine• Corporate Waste• Audit as tool for Officer/Director

education• Independence of Board – active, not

caretakers• Regular self-analysis by Board• Settling policy and providing oversight

Summary

A Legal Review Will:

• Educate and protect the organization and its leadership

• Identify critical risks• Lead to the development of policies and procedures

for avoiding liability risks and for addressing them efficiently and effectively when the occur

• Lead to the development of a plan for how the organization responds when something goes wrong

Robert J. WeilLaw Office of Robert J. Weil, PLLC

4031 University Drive, Suite 100Fairfax, Virginia 22030

(703) 934 2036 O(703) 277 7730 F(703) 399 5671 Cbob@rweillaw.com