Ohio Code 1745.56 – Liability of managers and members
(A) The members, the managers, and the officers of an unincorporated nonprofit association shall not be personally liable for any obligation of the association.
Terms Used In Ohio Code 1745.56
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Equitable: Pertaining to civil suits in "equity" rather than in "law." In English legal history, the courts of "law" could order the payment of damages and could afford no other remedy. See damages. A separate court of "equity" could order someone to do something or to cease to do something. See, e.g., injunction. In American jurisprudence, the federal courts have both legal and equitable power, but the distinction is still an important one. For example, a trial by jury is normally available in "law" cases but not in "equity" cases. Source: U.S. Courts
- Governing principles: means all agreements, whether oral, in a record, or implied from its established practices, or any combination of them, that govern the purpose or operation of an unincorporated nonprofit association and the rights and obligations of its members and managers. See Ohio Code 1745.05
- Manager: means a person, irrespective of the person's designation as director or other designation, that is responsible, alone or in concert with others, for the management of an unincorporated nonprofit association as stated in division (E) of section 1745. See Ohio Code 1745.05
- Member: means a person that, under the governing principles of an unincorporated nonprofit association, is entitled to participate in the selection of persons authorized to manage the affairs of the association or in the adoption of the policies and activities of the association. See Ohio Code 1745.05
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Person: means an individual, corporation, business trust, statutory entity trust, estate, trust, partnership, limited liability company, cooperative, association, joint venture, public corporation, government or governmental subdivision, agency, or instrumentality, two or more persons having a joint or common interest, or any other legal or commercial entity. See Ohio Code 1745.05
- Statute: A law passed by a legislature.
- Unincorporated nonprofit association: means an unincorporated organization, consisting of two or more members joined by mutual consent pursuant to an agreement, written, oral, or inferred from conduct, for one or more common, nonprofit purposes. See Ohio Code 1745.05
(B)(1) Managers who vote for or assent to any of the following shall be jointly and severally liable to the association as provided in division (B)(2) of this section:
(a) A distribution of assets to members contrary to law or the governing principles;
(b) A distribution of assets to persons other than creditors during the winding up of the affairs of the association on dissolution or otherwise without the payment of all known obligations of the association or without making adequate provision for that payment;
(c) The making of loans, other than in the usual conduct of its affairs or in accordance with provisions for the making of loans in the governing principles, to an officer, manager, or member of the association.
(2) The managers described in division (B)(1) of this section shall be jointly and severally liable to the association as follows:
(a) In cases under division (B)(1)(a) of this section, except as provided in division (B)(3) of this section, up to the amount of the distribution in excess of the amount that could have been distributed without violation of law or the governing principles but not in excess of the amount that would inure to the benefit of the creditors of the association if it was insolvent at the time of the distribution or there was reasonable ground to believe that by that action it would be rendered insolvent, or to the benefit of the members other than members of the class in respect of which the distribution was made;
(b) In cases under division (B)(1)(b) of this section, except as provided in division (B)(3) of this section, to the extent that those obligations that are not otherwise barred by statute are not paid or for the payment of which adequate provision has not been made;
(c) In cases under division (B)(1)(c) of this section, for the amount of the loan with interest at the rate of six per cent per annum until that amount has been paid.
(3) A manager shall not be liable under division (B)(1)(a) or (b) of this section if in determining the amount available for any distribution under that division, the manager in good faith relied on a financial statement of the association prepared by an officer or employee of the association in charge of its accounts or certified by a public accountant or firm of public accountants, in good faith considered the assets to be of their book value, or followed what the manager believed to be sound accounting and business practice.
(C) A manager who is present at a meeting of the managers or of a committee of the managers at which action on any matter is authorized or taken and who has not voted for or against that action shall be presumed to have voted for the action unless the manager’s written dissent from the action is filed either during the meeting or within a reasonable time after the adjournment of the meeting, with the person acting as secretary of the meeting or with the secretary of the association.
(D) A member who knowingly receives any distribution made contrary to law or the governing principles shall be liable to the association for the amount received by the member that is in excess of the amount that could have been distributed without violation of law or the governing principles.
(E) A manager against whom a claim is asserted under or pursuant to this section and who is held liable on the claim shall be entitled to contribution, on equitable principles, from other managers who are also liable. Additionally, any manager against whom a claim is asserted under or pursuant to this section or who is held liable on the claim shall have a right of contribution from the members who knowingly received any distribution made contrary to law or the governing principles, and those members as among themselves shall also be entitled to contribution in proportion to the amounts received by them respectively.
(F) No action shall be brought by or on behalf of an association upon any cause of action arising under division (B)(1)(a) or (b) of this section at any time after two years from the day on which the violation occurs.
(G) Nothing in this section shall preclude any creditor whose claim is unpaid from exercising any rights that the creditor otherwise would have by law to enforce the creditor’s claim against the assets of the association distributed to the members or other persons.