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Can member see records?

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Can member see records?

If a member of our 501(c)(3) nonprofit corporation demands to see all of the records of the corporation for the past two years, is there anything that says we have to give them to her? The Board feels this is not in the best interest of the members.

When you say the woman is a “member” of the corporation, I assume that you mean she has legal rights with respect to the organization, such as the right to vote for directors, and is in a position analogous to a shareholder of a business corporation. I assume that she is not merely a contributor who is given a feel-good status by being called a member but who has no such rights.

State laws vary somewhat in the particulars, but generally they provide that members of a nonprofit corporation may inspect the books and records of the corporation for “a proper corporate purpose.”  This would include such things as checking the finances, reviewing conflict of interest transactions, assuring that the directors are not breaching their fiduciary duties, or developing issues that might lead to election changes in the board.  It would generally not include using the information for personal profit, or for finding confidential information about other members.  She may be entitled to see some records and not others.

Once the member articulates a purpose, the burden is usually upon the board to show why she should not be permitted to inspect the records. The fact that she might “stir things up” is probably not a sufficient reason.  When you ask my favorite question about a nonprofit -- “Whose organization is it? -- with a membership organization, the answer is: the members’. The members have the ultimate power. The directors are subservient to them.

Wednesday, April 6, 2011

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