New Legal Guidelines for Nonprofits During the COVID-19 Pandemic

Los Angeles, CA. The California Department of Justice Charitable Trusts has issued new guidelines during the worldwide COVID-19 pandemic and State’s shelter-in-place order.

Right now charitable organizations are called upon more than ever to meet the critical needs of communities. In California, Attorney General Becerra (pictured above) is conducting outreach to nonprofits with the new information.

Here are a few of the modified details:

Unless prohibited by the nonprofit’s emergency bylaws, the following actions can be taken to conduct the corporation’s ordinary business operations and affairs during an emergency: Directors may participate in the board meeting through telephone conference calls, video conference calls, or through electronic transmission provided that each director can communicate with other directors concurrently and has means of participating in all matters before the board.

Directors of public benefit corporations can take action without a board meeting if all directors consent in writing and the quorum requirement is met. (Corp. Code, § 5211, subd. (b).) The written consent of the directors must be kept with the minutes of the proceedings of the board. (Id.) Note that directors cannot vote by proxy.

Many nonprofit organizations have endowment funds, which are donor-restricted funds that are intended to be invested and used in perpetuity to support the nonprofit’s charitable programs. Endowments are subject to the requirements of the Uniform Prudent Management of Institutional Funds Act (UPMIFA). Nonprofits need to be cautious on how much they spend from their endowment funds. Spending more than 7 percent of the fair market value of an endowment fund may create a presumption of imprudence. While your organization may be tempted to look to endowments as a means of addressing unanticipated costs and budget shortfalls, before your organization decides to invade principal or borrow against the principal, which is not permitted, the board should contact the donors to inquire whether they are willing to release or modify restrictions to allow for more spending authority.

For more information, here’s a link with all the information:

https://oag.ca.gov/sites/all/files/agweb/pdfs/charities/publications/charities-covid19-governance.pdf