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#1 Razzy9

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Posted 31 January 2013 - 02:46 PM

I am a co-founding member of a 501c3 in California, we recently had a board member give us her 30 day notice. The company credit card is under her name and there is still a balance on the card that the company can’t feasibly pay in full by the deadline she is giving us. What are our legal liabilities? What can we do?

#2 pg1067

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Posted 01 February 2013 - 07:53 AM

I don't see that the company's status as a 501c3 entity is relevant here.

Assuming the company is a corporation, using a credit card that is issued to a "board member" (whatever exactly that means) is incredibly foolish.

In any event, the nature of the company's obligations to the "board member" depend entirely on the terms of the contract between the company and the "board member" pursuant to which the company used the "board member's" credit card. If no agreement existed regarding what would happen if/when the "board member" resigned, then it is likely that the "board member" has no legal ability to force on the company any "deadline" to pay the balance in full.

#3 Tax_Counsel

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Posted 01 February 2013 - 08:12 AM

I am a co-founding member of a 501c3 in California...


Well, I assume you mean an organization that is exempt under Internal Revenue Code (IRC) section 501©(3), which simply tells you the federal tax treatment of the organization, and that doesn’t affect the answer to your question here.

The company credit card is under her name and there is still a balance on the card that the company can’t feasibly pay in full by the deadline she is giving us. What are our legal liabilities? What can we do?


Your obligation is to pay back the board member pursuant to whatever agreement the board member has with the organization about the use of the board member’s credit. If you didn't get an express agreement in writing on that, then that was a poor business practice. As for what the organization can do, its options depend on the details of organization. The board might try borrowing the money from some other lender to pay off the board member. It might try selling some assets. It might try raising funds in some fashion. It might try negotiating with the departing board member for a repayment plan that the organization is able to pay. It might just blow off the board member until such time as the board member sues the organization. It might file bankruptcy. There may be other options, too, depending on the specific circumstances you have. You likely knew most of those options already. If what what you want to know is what is the best option, no one here can advise you on that since no one here is familiar with the details of your organization.




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