CORPORATE DEATH PENALTY

There is a corporate death penalty.  Religious organizations can be sentenced to oblivion.

Typically, a non-profit corporation ends up forcibly terminated because it failed to follow the corporate forms.  Usually, the failure to follow is not sporadic or just sloppiness but an abandonment.  The abandonment of the corporate life usually includes failure to maintain membership records, failure to define voting membership qualifications, failure to elect directors or other officers in accord with bylaws, failure to maintain proper financial records and controls, failure to conduct regular board meetings, and an inability by application of neutral principles for a court or court appointed receiver to identify those with a right to make decisions about the assets of the non-profit corporation.

In Ohio v Omar Ibn Khattab Mosque, Inc., 2017 Ohio 4453 (Ohio App. 10th Dist. 2017), the Attorney General of Ohio sought dissolution of the non-profit corporation and appointment of a receiver to form a successor non-profit corporation that would own the assets of Khattab Mosque, Inc.  The court affirmed a magistrate’s findings that board members were attempting to hold office beyond their terms, multiple efforts to elect successors had merely multiplied disputes and claims, the mosque’s bank froze its accounts so it could not pay its bills because of competing claims, each faction before the court wanted control of church assets and ouster of the board members representing the opposite faction, and each side was attempting to drag the Attorney General into ecclesiastical disputes over qualifications of board members.  The court refused to resolve any of the disputes, noting that years of litigation had already failed to do so, and simply granted the Attorney General’s petition to dissolve the corporation and appoint a receiver to supervise creation of a successor entity and all in only 40 pages.

Too often, such calamities arise from building programs.  The Khattab Mosque collapse began in a building program that may have resulted in a battle for control.  Churches, mosques, synagogues and para-church organizations that assume everyone will remain loyal, honest, and accommodating throughout the years will see no need for organizational documents, rules of corporate governance, and otherwise documented elections and regular meetings.  Strong leadership that seemed to make such things unnecessary will retire or die.  New members will sometimes become disenfranchised with the old ways.  These are the reasons corporate forms matter.

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