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BizIPEsq.
BizIPEsq., Attorney
Category: Business Law
Satisfied Customers: 996
Experience:  I am a business attorney. I represent individuals and companies with all business related matters.
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Hello. Question about a legal matter. A year ago, my sister

Resolved Question:

Hello. Question about a legal matter. A year ago, my sister asked me to be on the board of a non-profit organization she was organizing that provides books to young children. She has been involved in a partnership with a national organization that focuses on this initiative for about three years through her employer--a large urban school district. After a year or so of implementing this initiative, her employer decided not to continue to its sponsorship. My sister decided to start a nonprofit organization to continue this partnership with the national organization. When she asked me to be on the board of this nonprofit org, I told her that I would need to check the conflict of interest guidelines of my employer--we both work for the same urban school district. Last year, she told me that she was feverishly fundraising for the new initiative to maintain the level of books sent monthly to about 30,000 children in advance/anticipation of her employer's sponsorship discontinuance. She had partnered with a gentleman who is the publisher of a community newspaper and is a family friend. The publisher who agreed to be on the board. Although my sister and this gentleman had numerous conversations, I was not knowledgeable about the details of their interactions. In casual conversation with my sister about how things were going, she would talk about her high level of stress and update me on some of the efforts she was making to reach out to potential partners. In late November or early December, she presented for my signature organizational papers for her 501(c)(3). I read the legal documents which were prepared by the publisher's attorney, identified inaccuracies in some of the wording, and told her I could not sign them in their current form. I also stated again that I would need to check our employer's conflict of interest guidelines before any involvement. She agreed that she needed to do the same and suggested we draft similar correspondence, however this never came to fruition. When she approached me again a month or so later with corrected papers for execution, I told her that I had reconsidered and preferred not to be a board member at this time.

Fast forward to this evening: Upon my arrival at home this evening, I found a letter sent priority mail from the president of the national organization. It seems that my sister's organization has a balance due of nearly $250,000 which represents the cost of the books and mailings that were made monthly to children by the national organization. It seems that my sister allowed the national organization to continue to mail these books without putting the mailings on hold when our employer discontinued support of the initiative. The letter outlines all discussions with my sister over the past year regarding repayment of these funds, and expresses his frustration and disappointment over multiple repayment promises broken by my sister. The gentleman states he spoke with the publisher--who replied he knew nothing of the matter and would speak with my sister. The gentleman has not heard anything so he sent me a letter addressing me as secretary/officer of the board, and asks me to intercede in bringing this to a resolution. I called my sister this evening, who was apologetic but said that this is her problem and I would not be financially responsible. I told her I was concerned that the gentleman made reference to several other steps he would take in the next 10 days if things remain the same.

I am very concerned that I will be dragged into a major disagreement which will ultimately be handled through legal measures. I never signed anything that would in any way implicate me as entering into a board relationship with my sister's organization.

Need advice.
Submitted: 1 year ago.
Category: Business Law
Expert:  BizIPEsq. replied 1 year ago.

TheLegalistEsq :

Hello, I will be helping you.

TheLegalistEsq :

Did you ever sign any resolutions on behalf of the company?

Customer:

No

Customer:

I have not signed any document.

TheLegalistEsq :

It'

TheLegalistEsq :

It would be difficult then to associate you with the organization. Not that they may not try but being the "brother of" does not equate liability

Customer:

How do I respond to the letter I received?

TheLegalistEsq :

I would send the gentleman a notice back saying that you are not associated with this organization and that he needs to direct all inquiries to the organization itself

TheLegalistEsq :

Was your name mentioned in the 501c3 application?

Customer:

Yes, my sister said the attorney filed the application with three board members names, including mine. When the papers were presented to me for signature, I declined to sign.

Customer:

In the letter, should I state that I had no knowledge of this matter and reference my sibling relationship?

TheLegalistEsq :

Not withstanding your denial, the fact that you are named as director in the application may mean that you are actually a director. Do you know if the company is a corporation?

Customer:

In that case, anyone can apply with your name as the director of an organization and you would be liable. Isn't some type of affirmation required by me to be a director?

Customer:

I believe it is incorporated.

Customer:

Any further guidance?

TheLegalistEsq :

please bear with me

TheLegalistEsq :

I just briefly looked at a 1023 not for profit application and I did not see the requirement of directors to sign their name. However such signature would generally appear in the additional documents that are submitted with the application

TheLegalistEsq :

since most likely your SS appeared that should suffice from the perspective of the application

Customer:

Yes, which I declined to sign.

Customer:

what are my options?

TheLegalistEsq :

I think you should assume (at least from your perspective) that you are a director. Now, do not forget that this is a corporation and you are still protected by its limited liability status

TheLegalistEsq :

Directors are generally not liable to the debts of the corporation

Customer:

Ok, I should respond as described?

TheLegalistEsq :

You could deny being a director I would not reference your sister as your family member simply refer the person to the organziation

Customer:

Ok. I will deny directorship, and will not reference my sister specifically.

Customer:

It's probable that the president of the national organization is being pressed by his board about this debt.

TheLegalistEsq :

you should also consider issuing a written notice to your sister where you are shocked to discover that someone considered you as a director of the company and that you demand her written affirmation that in fact you are not'

Customer:

Great. Will do.

Customer:

I appreciate your help.

TheLegalistEsq :

Please rate my answer. Good luck!

Customer:

One additional question: does the notice to my sister need to be notarized?

TheLegalistEsq :

no. you can even send by email

Customer:

Oh, okay. Thanks again. Will rate as excellent :).

TheLegalistEsq :

Thank you. Cheers

Customer:

Ditto.

BizIPEsq., Attorney
Category: Business Law
Satisfied Customers: 996
Experience: I am a business attorney. I represent individuals and companies with all business related matters.
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