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Risk Management

Nonprofit Act

South Dakota Nonprofit Corporation Act Legislation

Revised Model Nonprofit Corporations Act

Background

The original Nonprofit Corporation Act was enacted in 1965. Diverse types of nonprofits are governed under the Nonprofit Corporation Act, such as religious organizations, private and community foundations, health care organizations, educational institutions, homeowners associations, cooperatives, and the list goes on. Although many of our nonprofits have pushed to be at the forefront and leaders in industries, our nonprofit laws have not kept pace. There have been no major updates to our nonprofit laws in over 50 years. The proposed language in the bill is developed from the Third Edition of the Revised Model Nonprofit Corporation Act that was adopted by the America Bar Association in August of 2008. Most states have derived their nonprofit corporation laws from or are closely related to the various model legislation adopted by the American Bar Association. Domiciles that follow some version of the Model Nonprofit Corporation Act are generally viewed favorably as it provides for greater uniformity, richer sources of precedent, statutory interpretation and clarity of law. A prominent goal of the Third Edition of the Revised Model Nonprofit Corporation Act was to follow the Model Business Corporation Act to the extent possible; however, there are inherent differences that distinguish nonprofits from profits that necessitate distinctive treatment.  In 2010, a nonprofit law subcommittee of the Business Law Committee of the State Bar of South Dakota was assigned to analyze and modify the model legislation to tailor to the needs of South Dakota. After passing through the subcommittee and larger Business Law Committee, the proposed legislation was passed by the State Bar of South Dakota in June, 2014, to be recommended for consideration by the South Dakota State Legislature. The proposed revised Act was introduced in the legislature in 2015. Concerns were expressed regarding existing nonprofits, specifically smaller and rural nonprofits, which may not desire to have the advances proposed in the bill as they simply want to keep status quo. The proposed bill was tabled; and immediately thereafter, the nonprofit subcommittee of the Business Law Committee began revising the proposed law. The most significant change made being the current Nonprofit Corporation Act will stay in place as is and adding as separate Chapters, 47-22A et seq. reflecting the updated Revised Model Nonprofit Corporation Act. This will enable existing nonprofits the ability to elect if they want to be governed under the new law. Newly organized nonprofits will fall under the updated Act once it is in place and cannot elect to be governed under the old law. The subcommittee has further worked on provisions that although stray from the model act, are more tailored to meet the needs of South Dakota nonprofits. Below if educational materials you may find helpful in understanding the changes made in 2015.

Educational Materials

CLE Materials - Nonprofit Law CLE's
- Knutson PowerPoint

Legislative History

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