Legal Question in Business Law in California

can someone "take over" or assume control of a non profit? does a non profit have shares/shareholders?


Asked on 8/28/11, 1:58 pm

1 Answer from Attorneys

It depends on the structure of the non-profit. A non-profit cannot have shares or shareholders, but it can have voting members who may control the entity much the way shareholders do. Also, not all non-profits are 501(c)(3) charities. There are a number of other 501(c) categories of non-profits, such as fraternal organizations, mutual benefit societies, and mutual insurance companies, all of which have their own specialized organizational control structures. Any of them could be "taken over" by an organized movement within the decision-making structure of the organization. The Consumers Union of America, publisher of Consumer Reports is an example. Since they actively seek to influence government conduct and legislation, they cannot qualify as a charity, but they are a non-profit. The CU is governed by a board of directors who are elected by the subscribers to Consumer Reports through an annual ballot mailed to subscribers. The California State Automobile Assn. is likewise governed by a board elected annually by its members, as is the Sierra Club, and the REI Co-op recreational products retailer. Any of those organizations could be subject to a "take over" of the board by an organized group of members. Other non-profits, such as the McCullum Youth Court (which IS a 501(c)(3) charity, and on whose board I served) are structured such that the board elects its own replacement members as board members resign or reach the end of their terms. An organization such as that could also be taken over, in theory, but it would be much more difficult due to having to wait for existing board members to resign or term-out.

Read more
Answered on 8/28/11, 2:36 pm


Related Questions & Answers

More Business Law questions and answers in California