Clawbacks Lose Ground

April 12, 2012 Posted by The Law Firm for Non-Profits, P.C. in Donations, News

Does your organization conduct thorough due diligence before accepting donations? If not (and you’re not alone), your nonprofit may find itself having to repay donations later determined to have been made from funds associated with illegal activities.

But Minnesota Gov. Mark Dayton is trying to change that. He recently signed legislation that will help shield nonprofit organizations from having to repay donations of illegal funds.

Specifically, in bankruptcy proceedings, trustees will now only have two years, instead of six, to “clawback” or retrieve donations made from illegally obtained funds.

Nonprofit groups in Minnesota strongly supported the bill, believing it to be unfair to ask for repayment of donations that had already been spent. But the bill would also preclude trustees from recouping illegally spent money, for example, in the case of Ponzi schemes.

Only time will tell whether opponents of the bill can successfully argue that it is unconstitutional  or if similar bills will start popping up in other states around the country.

NOTE: The information contained herein is not intended to be legal advice and the reader should know that no Attorney-Client relationship or privilege is formed by the posting or reading of this article which is also not intended to solicit business.

Casey Summar, Partner, The Law Firm for Non-Profits, 4705 Laurel Canyon Blvd, #306, Studio City, CA 91607

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