Rhode Island General Laws Chapter 7-6, “Nonprofit Corporations,” outlines the framework for the formation, governance, and dissolution of nonprofit organizations within the state. A critical aspect of this chapter pertains to the requirements for public disclosure and reporting to maintain tax-exempt status and ensure accountability. Specifically, Rhode Island law, mirroring federal IRS requirements for 501(c)(3) organizations, mandates that certain financial and operational information be made accessible to the public. This includes making annual reports and financial statements available. While the specific details of what constitutes “public disclosure” can vary, the intent is to provide transparency to donors, beneficiaries, and the general public. The Rhode Island Secretary of State’s office plays a role in maintaining corporate records, and nonprofit corporations are generally required to file annual reports with this office. Failure to comply with these reporting and disclosure obligations can lead to administrative dissolution or loss of tax-exempt status. Therefore, understanding the specific filing requirements and the mechanisms for public access to these documents is crucial for the proper functioning of a Rhode Island nonprofit. The question probes the understanding of these fundamental transparency and reporting duties inherent in operating a nonprofit entity under Rhode Island law.

The Rhode Island Nonprofit Corporation Act, specifically RIGL § 7-6-13, outlines the requirements for the dissolution of a nonprofit corporation. When a nonprofit corporation decides to dissolve, it must follow a specific procedure. The first step typically involves a resolution by the board of directors. Following board approval, the resolution must be submitted to the members for their vote. For a dissolution to be approved by the members, it generally requires a two-thirds vote of all members entitled to vote on the matter, unless the articles of incorporation or bylaws specify a different voting threshold, provided it is not less than a majority. After member approval, the corporation must file Articles of Dissolution with the Rhode Island Secretary of State. Crucially, before filing these articles, the corporation must provide notice of its intent to dissolve to all known creditors and claimants, allowing them a period to present claims. RIGL § 7-6-13(d) mandates that assets remaining after the satisfaction of all liabilities and obligations must be distributed for one or more exempt purposes specified in the articles of incorporation or to the federal government, state, or local government for a public purpose. This ensures that the charitable or public purpose for which the nonprofit was established continues to be served. Failure to adhere to these distribution requirements can lead to personal liability for directors and officers. The question probes the correct procedural step after member approval of dissolution and before the filing of dissolution documents, focusing on the statutory requirement for creditor notification.

The Rhode Island Nonprofit Corporation Act, specifically Rhode Island General Laws § 7-6-1 et seq., outlines the procedures for the dissolution of nonprofit corporations. When a nonprofit corporation in Rhode Island wishes to dissolve voluntarily, it must follow a specific process. This process typically involves the adoption of a resolution by the board of directors, followed by approval from the members if the corporation has members with voting rights. The Act mandates that a certificate of dissolution be filed with the Rhode Island Secretary of State. This certificate must contain specific information, including the name of the corporation, the date the dissolution was authorized, and a statement that the dissolution was approved in accordance with the corporation’s articles of incorporation and the provisions of the Act. Furthermore, before filing the certificate, the corporation must generally cease conducting its business, settle its affairs, and distribute its assets. This distribution must be made in accordance with the corporation’s articles of incorporation and applicable law, ensuring that any remaining assets are distributed to one or more qualified organizations described in section 501(c)(3) of the Internal Revenue Code, or to a public body for public use, thereby upholding the public benefit purpose of the nonprofit entity. The filing of the certificate of dissolution with the Secretary of State is the final legal step that formally dissolves the corporation.

The Rhode Island Nonprofit Corporation Act, specifically Rhode Island General Laws Section 7-6-16, outlines the requirements for a nonprofit corporation to dissolve voluntarily. For a nonprofit corporation to dissolve voluntarily, a resolution of dissolution must be adopted by the board of directors and then approved by the members. The Act specifies that such approval generally requires a majority vote of all members entitled to vote thereon, unless the articles of incorporation or bylaws require a greater proportion. Furthermore, after the dissolution is authorized, the corporation must file Articles of Dissolution with the Rhode Island Secretary of State. These articles must include a statement that the dissolution was authorized in accordance with the provisions of the Act, and they must be accompanied by a certificate from the Rhode Island Division of Taxation confirming that all state taxes have been paid or that arrangements have been made for their payment. The process also involves winding up the corporation’s affairs, which includes ceasing its business operations, collecting its assets, paying or making provision for its liabilities, and distributing any remaining assets to designated recipients, typically other nonprofit organizations with similar purposes, as stipulated in the articles of incorporation or determined by the members or the board. The question asks about the initial step to commence voluntary dissolution for a Rhode Island nonprofit. While member approval is crucial, the process formally begins with the board’s action to propose the dissolution.

The Rhode Island Nonprofit Corporation Act, specifically Rhode Island General Laws § 7-6-14, addresses the dissolution of nonprofit corporations. When a nonprofit corporation dissolves, its assets must be distributed for one or more exempt purposes. This means that any remaining property, after satisfying liabilities and obligations, cannot be distributed to members, directors, or officers. Instead, these assets must be transferred to another organization that is also dedicated to exempt purposes, typically a 501(c)(3) organization, or to a public body for public use. The Rhode Island Superior Court, sitting in its probate jurisdiction, plays a role in overseeing the dissolution process, particularly when there are disputes or when the corporation’s articles of incorporation do not specify a recipient for remaining assets. The primary goal is to ensure that the charitable or public benefit mission continues through the distribution of assets. Therefore, in the scenario described, the remaining funds must be allocated to an organization that shares a similar exempt purpose, as mandated by Rhode Island law to prevent private inurement.

In Rhode Island, a nonprofit corporation seeking to dissolve voluntarily must follow a specific statutory procedure. The process begins with a resolution of dissolution adopted by the board of directors. This resolution must then be submitted to the members for approval, typically at a meeting where a supermajority vote, as defined by the corporation’s bylaws or Rhode Island General Laws Chapter 7-6, is required. Following member approval, the corporation must file a Certificate of Dissolution with the Rhode Island Secretary of State. This certificate must include specific information, such as the date the dissolution was authorized and a statement that the corporation has ceased conducting business. Crucially, before or concurrently with filing the certificate, the corporation must provide notice of dissolution to its creditors and claimants. Rhode Island law mandates that this notice inform creditors of the dissolution and provide a deadline by which claims must be submitted. This ensures that all known and potential liabilities are addressed before the corporation’s legal existence is terminated. Failure to properly notify creditors can have significant consequences, potentially allowing creditors to pursue claims against the dissolved corporation’s assets or even its directors and officers in certain circumstances. The final step involves winding up the corporation’s affairs, which includes paying off debts, distributing remaining assets to designated beneficiaries (if any), and fulfilling any other legal obligations.

The Rhode Island Nonprofit Corporation Act, specifically Rhode Island General Laws § 7-6-1 et seq., governs the formation and operation of nonprofit corporations in the state. When a nonprofit corporation dissolves, its assets must be distributed according to specific legal requirements to ensure that the organization’s mission is upheld and that no private benefit is derived from its dissolution. Rhode Island law, consistent with federal tax law for 501(c)(3) organizations, mandates that upon dissolution, any remaining assets after the satisfaction of debts and liabilities must be distributed for one or more exempt purposes. This means assets cannot be distributed to members, directors, or officers of the corporation. The Act allows for distribution to another nonprofit corporation with similar purposes, or to a government entity for a public purpose. The question describes a scenario where a Rhode Island nonprofit corporation, “Ocean State Preservation Society,” is dissolving and has remaining assets after all creditors are paid. The proposed distribution to its founding members is prohibited by law because it constitutes a private inurement of assets, which is contrary to the fundamental principles of nonprofit status and the explicit provisions of Rhode Island’s nonprofit corporation law. Such a distribution would be a violation of the nonprofit’s dedication to public or charitable purposes. Therefore, the distribution to the founding members is not permissible.

The Rhode Island Nonprofit Corporation Act, specifically Rhode Island General Laws Title 7, Chapter 12, governs the formation, operation, and dissolution of nonprofit corporations within the state. A key aspect of this act is the requirement for a nonprofit to maintain certain records and provide access to them under specific circumstances. Section 7-12-17 outlines the inspection rights of members. It states that any member of a nonprofit corporation is entitled to inspect and copy, during business hours at the corporation’s principal office, any of the corporation’s records, provided the member’s demand is made in good faith and with a proper purpose, reasonably related to the member’s interest as a member. The “proper purpose” is a crucial element, implying that the request must be for a legitimate reason connected to the member’s role within the organization, not for harassment or personal gain unrelated to their membership. For example, a member seeking records to understand the financial stewardship of funds they contributed, or to investigate potential mismanagement, would likely satisfy the proper purpose requirement. Conversely, a member seeking records solely to gain a competitive advantage for a personal business venture would not. The statute does not mandate that the corporation provide records outside of business hours or at a location other than its principal office, unless otherwise agreed. Furthermore, while members have inspection rights, these rights are not absolute and can be subject to reasonable limitations imposed by the corporation’s bylaws, as long as those limitations do not unreasonably infringe upon the statutory rights. The act also distinguishes between member rights and director rights regarding access to information, with directors generally having broader access.

The scenario describes a Rhode Island nonprofit corporation, “Ocean Guardians,” which was incorporated in 2010. In 2015, it received a significant donation from a private foundation designated for a specific capital project: the establishment of a marine research center. The corporation’s bylaws stipulate that any amendment to the corporation’s purpose requires a two-thirds majority vote of the entire membership. Subsequently, in 2022, the board of directors, citing a shift in environmental priorities and a decline in funding for the original project, voted to reallocate the restricted funds to a new initiative focused on coastal cleanup efforts. This action was taken without a membership vote. Rhode Island General Laws § 7-6-10 addresses the dissolution of nonprofit corporations, and § 7-6-11 outlines the procedures for amending articles of incorporation, which typically involves a vote of the board and, depending on the bylaws, potentially the members. However, the critical issue here is the handling of restricted funds and the potential breach of fiduciary duty by the board. Rhode Island law, like general nonprofit law, requires directors to act in good faith and in the best interests of the corporation, which includes adhering to donor restrictions unless specific legal provisions or donor consent allow for reallocation. The board’s unilateral decision to reallocate restricted funds without consulting the membership, as potentially implied by the bylaws regarding purpose changes, and without seeking a formal release from the donor or court approval, constitutes a significant deviation from standard nonprofit governance and donor intent. The bylaws’ requirement for a two-thirds membership vote for purpose amendments suggests a strong emphasis on member involvement in fundamental changes. While the reallocation of funds is not a direct amendment to the articles of incorporation, it fundamentally alters the use of a significant asset designated for a specific purpose, which could be seen as an indirect change in operational focus that aligns with the spirit of the bylaw. Therefore, the board’s action is likely invalid due to a potential breach of fiduciary duty and failure to adhere to the spirit, if not the letter, of the bylaws concerning the corporation’s mission and the use of restricted funds. The correct course of action for the board would have been to seek donor consent for the reallocation, petition a court for a cy pres order if donor consent was not obtainable and the original purpose was impossible or impracticable, or follow any specific provisions in the donation agreement or bylaws for such situations. The question hinges on the board’s authority to unilaterally reallocate donor-restricted funds, especially when the bylaws suggest a high threshold for changes in corporate purpose. The action taken by the board directly contravenes the principle of honoring donor intent for restricted gifts.

The Rhode Island General Laws, specifically Title 7, Chapter 11 (Rhode Island Nonprofit Corporation Act), governs the formation and operation of nonprofit corporations in the state. When a Rhode Island nonprofit corporation intends to dissolve voluntarily, it must follow a specific statutory procedure. This procedure requires a resolution of dissolution to be adopted by the board of directors, followed by approval by the members, if the corporation has members. The articles of dissolution must then be filed with the Rhode Island Secretary of State. Crucially, before filing the articles of dissolution, the corporation must provide notice of its intent to dissolve to all known creditors and claimants. This notice must be mailed to each creditor at its last known address and must state that the corporation is dissolving and that claims against it must be presented within a specified period, which cannot be less than 120 days after the date of mailing the notice. This ensures that creditors have a reasonable opportunity to assert their claims before the corporation’s assets are distributed. Failure to provide this notice can have implications for the validity of the dissolution and potential liability for directors and officers. The question tests the understanding of this mandatory pre-dissolution notification requirement to creditors under Rhode Island law.

In Rhode Island, the Rhode Island Nonprofit Corporation Act (RIGL Chapter 7-6) governs the formation and operation of nonprofit corporations. When a nonprofit corporation dissolves, it must follow specific procedures for winding up its affairs. This includes ceasing to conduct its business except as necessary for winding up, notifying creditors, and collecting and preserving assets. Crucially, after paying or making provision for all liabilities and obligations, any remaining assets must be distributed for one or more exempt purposes specified in the articles of incorporation or bylaws, or to another nonprofit organization with similar purposes. This is often referred to as the “trust fund doctrine” or the principle of “charitable trust” which dictates that assets dedicated to charitable purposes must continue to be used for such purposes. If the articles of incorporation do not specify a particular recipient, the Rhode Island Superior Court, upon application, may direct the distribution of assets to a suitable organization. This ensures that the charitable intent of the original donors and the corporation’s mission are upheld, preventing private inurement. The statute does not permit distribution to members, directors, or officers, unless they are also creditors and the distribution is in satisfaction of a debt.

The Rhode Island Nonprofit Corporation Act, specifically referencing Rhode Island General Laws § 7-6-1 et seq., outlines the procedures for the dissolution of nonprofit corporations. When a nonprofit corporation in Rhode Island ceases to conduct its activities, it must formally dissolve. This process typically involves a vote by the board of directors and, depending on the corporation’s bylaws and the specific circumstances, may also require approval from its members. Following the decision to dissolve, the corporation must file Articles of Dissolution with the Rhode Island Secretary of State. Crucially, before or concurrently with filing the Articles of Dissolution, the corporation must undertake the winding up of its affairs. This winding up process, as detailed in the Act, includes ceasing to conduct business except as necessary for winding up, collecting its assets, paying or making provision for its debts and obligations, and distributing any remaining assets. For a public charity or a private foundation, the distribution of remaining assets must be made to another organization that is exempt under Section 501(c)(3) of the Internal Revenue Code, or to a governmental unit for a public purpose, as stipulated by Rhode Island law. Failure to properly wind up affairs and distribute assets can lead to personal liability for directors and officers. The filing of Articles of Dissolution with the Secretary of State marks the official termination of the corporation’s existence. The specific wording in the statute emphasizes the orderly cessation of operations and the proper disposition of assets, ensuring that the charitable purpose, if applicable, is continued or fulfilled.

Rhode Island General Laws Chapter 7-6, specifically concerning nonprofit corporations, outlines the procedures for amending articles of incorporation. Section 7-6-14 addresses the requirements for amending the articles. For a corporation formed under this chapter, amendments must be adopted by the board of directors and then approved by the members. The specific threshold for member approval is typically a majority of the votes cast by members entitled to vote on the amendment at a meeting where a quorum is present, or by written consent of a majority of the members entitled to vote, unless the articles of incorporation or bylaws specify a higher percentage. The amendment becomes effective upon filing the amended articles with the Rhode Island Secretary of State. This process ensures that changes to the fundamental governing document of the nonprofit reflect the will of its membership, balancing the authority of the board with the rights of the members. The scenario presented involves a change to the corporate purpose, which is a significant amendment requiring adherence to these statutory provisions.

The Rhode Island Nonprofit Corporation Act, specifically Rhode Island General Laws §7-6-11, outlines the requirements for the dissolution of a nonprofit corporation. When a nonprofit corporation voluntarily dissolves, it must distribute its assets in accordance with its articles of incorporation or bylaws. If these documents do not specify asset distribution, or if the distribution is not possible, the assets must be distributed to one or more domestic or foreign corporations or foundations that are organized and operated exclusively for charitable, religious, educational, scientific, or eleemosynary purposes, or for the prevention of cruelty to children or animals, as permitted by the laws of Rhode Island and the United States. This ensures that the remaining assets continue to serve public benefit purposes, aligning with the original mission of the dissolving entity. The process involves filing a Certificate of Dissolution with the Rhode Island Secretary of State after all affairs have been wound up.

Rhode Island General Laws Chapter 7-6, specifically Section 7-6-18, addresses the dissolution of nonprofit corporations. This statute outlines the procedure for winding up the affairs of a nonprofit. Upon dissolution, after satisfying all liabilities and obligations, any remaining assets must be distributed for one or more exempt purposes specified in the articles of incorporation or bylaws. If the articles or bylaws do not specify an exempt purpose, or if the Rhode Island Superior Court deems it impracticable, the assets are to be distributed to such other organizations as the court may determine to be most appropriate for the accomplishment of the purposes for which the corporation was formed. This ensures that the charitable or public benefit purpose for which the nonprofit was established continues to be served, even after its dissolution. The key is that the assets must be distributed to organizations that themselves are dedicated to exempt purposes, aligning with the original mission of the dissolving entity.

Rhode Island General Laws Chapter 7-6, specifically the provisions concerning nonprofit corporations, dictates the requirements for holding annual meetings. Section 7-6-12 outlines that a nonprofit corporation must hold an annual meeting of its members. The purpose of this meeting is typically to elect directors, review financial statements, and address other corporate business. Failure to hold an annual meeting can lead to various consequences, including potential dissolution proceedings or loss of good standing with the state. While the law mandates the meeting, it does not specify a precise date or time within the fiscal or calendar year, leaving that determination to the corporation’s bylaws. The bylaws, which are internal rules adopted by the corporation, are crucial in defining the timing and conduct of such meetings. Therefore, the absence of a specific statutory deadline for the annual meeting means that the bylaws govern its scheduling. The question tests the understanding that while the annual meeting is mandatory, its specific timing is a matter of internal corporate governance as defined by the bylaws, rather than a rigid statutory deadline.

The Rhode Island Nonprofit Corporation Act, specifically referencing provisions related to corporate governance and member rights, dictates the procedures for calling special meetings of members. According to Rhode Island General Laws § 7-6-39, a special meeting of the members may be called by the board of directors, by a person or persons authorized to do so by the articles of incorporation or bylaws, or by members holding at least one-tenth of the voting power. In this scenario, the bylaws of the Ocean State Maritime Heritage Society explicitly grant the president the authority to call special meetings. Therefore, the president’s action is a valid method for convening a special meeting of the members, assuming the bylaws were properly adopted and are in effect. The question tests the understanding of who can initiate a special meeting under Rhode Island law and how that authority can be exercised through the organization’s governing documents. The presence of a quorum, as defined by the bylaws, is essential for the transaction of business at any meeting, but it does not affect the validity of the call itself. Similarly, the notice period is a procedural requirement for holding the meeting, not for initiating the call.

The Rhode Island Nonprofit Corporation Act, specifically Rhode Island General Laws § 7-6-1 et seq., governs the formation, operation, and dissolution of nonprofit corporations within the state. A critical aspect of this act pertains to the distribution of assets upon dissolution. Rhode Island law, like many state statutes, mandates that upon dissolution, a nonprofit corporation’s assets must be distributed for charitable purposes, aligning with the organization’s original mission. This prevents private inurement and ensures that assets dedicated to public benefit are not diverted for private gain. Specifically, § 7-6-17 outlines the procedure for dissolution and the distribution of assets. It requires that after paying or making provision for all liabilities, any remaining assets shall be distributed to one or more domestic or foreign corporations or organizations engaged in activities substantially similar to those of the dissolving corporation, or to any other person, including a governmental entity, that is organized and operated exclusively for charitable, educational, religious, or scientific purposes. The key principle is that these assets must be used for purposes that continue to serve the public good, consistent with the original charitable intent of the nonprofit. Therefore, distribution to members, directors, or officers, unless they are also qualified charitable organizations receiving the assets for their own charitable purposes, is generally prohibited.

The Rhode Island Nonprofit Corporation Act, specifically Rhode Island General Laws § 7-6-10, addresses the dissolution of nonprofit corporations. When a nonprofit corporation dissolves, its assets must be distributed for exempt purposes. Section 7-6-10(d) mandates that after paying or making provision for all liabilities, any remaining assets shall be distributed to one or more domestic or foreign corporations or organizations engaged in activities substantially similar to those of the dissolving corporation, or to any other person or persons to which the assets may be distributed under the articles of incorporation or bylaws. Crucially, if the articles of incorporation or bylaws do not specify a recipient, the assets must be distributed to a recipient designated by the Superior Court of the county in which the corporation’s principal office is located, for purposes similar to those of the dissolving corporation. This ensures that the charitable or public benefit purpose for which the nonprofit was established continues to be served. The distribution to the State of Rhode Island as escheat property is generally a last resort, only occurring if no other suitable recipient can be identified or if the corporation’s purpose was not charitable in nature or has become impossible to fulfill. Therefore, the primary directive is to transfer assets to organizations with similar exempt purposes.

The Rhode Island Nonprofit Corporation Act, specifically Chapter 14 of Title 7 of the Rhode Island General Laws, governs the formation, operation, and dissolution of nonprofit corporations within the state. A critical aspect of this act pertains to the governance and responsibilities of the board of directors. Directors owe fiduciary duties to the corporation, which include the duty of care and the duty of loyalty. The duty of care requires directors to act in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, and in a manner the director reasonably believes to be in the best interests of the corporation. This includes making informed decisions, attending meetings, and actively participating in oversight. The duty of loyalty mandates that directors must act in the best interests of the corporation and not engage in self-dealing or conflicts of interest. When a director has a personal interest in a transaction with the corporation, that interest must be disclosed, and the transaction must be approved by a majority of disinterested directors or by a majority of the voting members, provided certain conditions are met to ensure fairness. Failure to uphold these duties can lead to personal liability for damages caused to the corporation. Therefore, when a director’s personal interest is involved in a contract, the proper procedure involves disclosure and approval by disinterested parties to maintain the integrity of the corporation’s governance and protect its assets. The scenario presented tests the understanding of how a director’s personal interest in a contract with the nonprofit corporation should be handled under Rhode Island law to avoid breaches of fiduciary duty.

The Rhode Island Nonprofit Corporation Act, specifically R.I. Gen. Laws § 7-6-14, outlines the requirements for the annual report of a nonprofit corporation. This report is a crucial filing that keeps the state informed about the organization’s ongoing status and compliance. It requires the corporation to report on its name, principal office address, the names and addresses of its directors and officers, and any other information the Secretary of State may require. Failure to file this annual report can lead to administrative dissolution of the corporation by the state. The question probes the understanding of what specific information is mandated for inclusion in this annual filing, testing knowledge of the statutory requirements for maintaining corporate good standing. The core concept is the state’s oversight mechanism for ensuring that registered nonprofit entities remain active and compliant with legal reporting obligations. This annual report is distinct from financial audits or tax filings, focusing instead on the corporate governance structure and basic operational details.

The Rhode Island Nonprofit Corporation Act, specifically referencing Rhode Island General Laws § 7-6-1 et seq., outlines the framework for the dissolution of nonprofit corporations. When a nonprofit corporation dissolves, its assets must be distributed in accordance with its articles of incorporation, bylaws, or a plan of dissolution. Crucially, if the corporation has received property from public sources or from donors who specified that the property be used for charitable purposes, these assets cannot be distributed to members, directors, or officers. Instead, Rhode Island law mandates that such assets must be distributed to one or more organizations that are themselves engaged in charitable activities, preferably those that align with the dissolved corporation’s original mission. This ensures that the charitable intent of the original funding is preserved. In the absence of specific provisions in the articles, bylaws, or a plan, the Superior Court of Rhode Island may direct the distribution of assets to eligible charitable entities. The key principle is the prevention of private inurement and the continuation of charitable purposes.

The Rhode Island Nonprofit Corporation Act, specifically Rhode Island General Laws § 7-6-10, outlines the requirements for a nonprofit corporation to dissolve voluntarily. For a nonprofit corporation to effect a voluntary dissolution, a resolution to dissolve must be adopted by the board of directors. Following board approval, this resolution must then be submitted to the members for their vote. The Act specifies that such a resolution requires the affirmative vote of two-thirds of the votes cast by the members entitled to vote thereon at a meeting of members duly called for that purpose, or by written consent, provided that the corporation has provided notice of the proposed action to all members entitled to vote thereon. If the corporation has no members, or no members with voting rights, the resolution must be adopted by the board of directors. The process involves proper notice to members and a supermajority vote to ensure significant member consensus for dissolution, reflecting a fundamental governance principle in nonprofit law.

The Rhode Island Nonprofit Corporation Act, specifically referencing Rhode Island General Laws § 7-6-1 et seq., outlines the framework for the formation, governance, and dissolution of nonprofit corporations within the state. A key aspect of this act pertains to the rights and responsibilities of directors, particularly concerning their fiduciary duties. Directors of Rhode Island nonprofits owe a duty of care and a duty of loyalty to the corporation. The duty of care requires directors to act with the care that a reasonably prudent person in a like position would exercise under similar circumstances, and to act in a manner the director reasonably believes to be in the best interests of the corporation. The duty of loyalty mandates that directors must act in good faith and in a manner the director reasonably believes to be in the best interests of the corporation, and must avoid self-dealing and conflicts of interest. When a director is found to have breached these duties, the corporation, or its members or beneficiaries under certain circumstances, may have grounds to seek remedies. These remedies are designed to restore the corporation to the position it would have been in had the breach not occurred. While monetary damages are a common remedy, equitable remedies such as injunctions or restitution are also available. The question probes the consequences of a director’s breach of fiduciary duty, specifically focusing on the potential for personal liability for financial losses incurred by the nonprofit. Rhode Island law, like many other states, allows for such liability when a director’s actions are demonstrably negligent or disloyal, leading to quantifiable financial harm to the organization. Therefore, a director found to have breached their fiduciary duties and caused financial loss to the nonprofit can indeed be held personally liable for those losses.

The scenario describes a Rhode Island nonprofit corporation, “Ocean State Preservation Society,” which has undergone a significant change in its mission and activities. The question probes the legal implications of such a fundamental shift on its tax-exempt status, specifically concerning the doctrine of “cy pres” and the potential for dissolution or amendment of its articles of incorporation. Rhode Island General Laws § 7-6-1 et seq., particularly the sections pertaining to nonprofit corporations and their governance, are relevant here. When a nonprofit’s stated purpose becomes impossible or impractical to fulfill, or when its activities significantly deviate from its original mission, the doctrine of cy pres may be invoked. This doctrine allows a court to redirect the organization’s assets or alter its purpose to align with the general charitable intent of the original donor or founders, as closely as possible. However, the process is not automatic. It typically requires a judicial proceeding or, in some cases, a specific statutory process for amendment of articles of incorporation that reflects a change in purpose, especially if it impacts tax-exempt status. The organization’s board of directors would likely need to formally propose and vote on amendments to the articles of incorporation to reflect the new mission. This would then need to be filed with the Rhode Island Secretary of State. Furthermore, if the change in mission is so drastic that it fundamentally alters the charitable purpose for which the organization was initially granted tax-exempt status by the IRS, it could jeopardize that status. The IRS requires that an organization’s activities continue to align with its stated exempt purpose. A significant shift in mission without proper legal and procedural adjustments could lead to revocation of tax-exempt status. Therefore, the most appropriate course of action for the organization to legally and effectively implement its new mission, while maintaining its corporate identity and seeking to preserve its tax-exempt status, involves amending its articles of incorporation to accurately reflect its current objectives and operations, in compliance with Rhode Island law and IRS regulations. This process ensures transparency and legal standing for the revised mission.

The Rhode Island Nonprofit Corporation Act, specifically Rhode Island General Laws §7-6-10, governs the dissolution of nonprofit corporations. When a nonprofit corporation is dissolved, its assets must be distributed for charitable purposes. This distribution is typically guided by the corporation’s articles of incorporation or bylaws. If these documents do not specify a particular recipient, the Rhode Island Superior Court, upon application by the Attorney General or any other person concerned, may direct the disposition of assets to a suitable charitable purpose. This ensures that assets dedicated to public benefit are not diverted for private gain. The process involves winding up affairs, paying debts, and then distributing remaining assets. The Attorney General of Rhode Island plays a crucial oversight role in ensuring that dissolved nonprofit assets are applied to appropriate charitable ends, aligning with the original mission of the organization and public policy. This principle of cy pres, or a similar doctrine of charitable trust, often guides the court’s decision in directing the distribution of remaining assets.

The Rhode Island Nonprofit Corporation Act, specifically referencing Rhode Island General Laws § 7-6-13, outlines the requirements for amending articles of incorporation for nonprofit corporations. An amendment must be adopted by the board of directors and then approved by the members. The statute mandates that a proposal to amend the articles of incorporation must be submitted to the members for a vote at a meeting of members. For the amendment to be adopted, it typically requires approval by a majority of the votes cast by members entitled to vote on the amendment, provided a quorum is present. However, the articles of incorporation or bylaws can specify a higher voting threshold. In this scenario, the proposed amendment was approved by the board of directors. The subsequent step, as per Rhode Island law, is submission to the membership for their vote. Without evidence of a member vote, the amendment is not legally effective. The question tests the understanding of the procedural steps required for amending the foundational documents of a Rhode Island nonprofit, emphasizing the dual approval process involving both the board and the membership. The correct answer reflects the necessity of member approval following board approval.

The Rhode Island Nonprofit Corporation Act, specifically Rhode Island General Laws (RIGL) § 7-6-10, outlines the requirements for a nonprofit corporation to be considered a public charity for the purpose of receiving certain tax exemptions and benefits. To qualify as a public charity, a nonprofit corporation must generally operate for exclusively charitable, religious, educational, scientific, literary, or prevention of cruelty to children or animals purposes. Furthermore, it must be organized and operated exclusively for such purposes, and no part of its net earnings may inure to the benefit of any private shareholder or individual. The Act also specifies that the corporation’s activities must not be carried on for profit or the benefit of its members, officers, or directors, other than as reasonable compensation for services rendered or expenses incurred. When considering the distribution of assets upon dissolution, RIGL § 7-6-24 mandates that such assets must be distributed to one or more organizations that are themselves exempt under Section 501(c)(3) of the Internal Revenue Code or to governmental entities for a public purpose. This ensures that the charitable mission continues or benefits the public good, preventing private inurement. Therefore, an organization that is solely dedicated to providing educational programs for underprivileged youth in Providence, Rhode Island, and upon dissolution, plans to distribute its remaining assets to the Rhode Island Foundation, which is a qualified 501(c)(3) organization, would meet the criteria for dissolution under Rhode Island law.

Rhode Island General Laws §7-6-10 governs the dissolution of nonprofit corporations. This statute outlines the procedures a nonprofit must follow to formally cease its operations and distribute its assets. The process typically involves a resolution by the board of directors or members, followed by the filing of Articles of Dissolution with the Rhode Island Secretary of State. Crucially, the law mandates that upon dissolution, after paying or making provision for all liabilities, any remaining assets must be distributed for one or more exempt purposes specified in the corporation’s articles or bylaws, or to the federal government, a state, or a local government for a public purpose. This ensures that the assets of a nonprofit continue to serve charitable or public interests, preventing private inurement. The specific wording of the statute emphasizes that distribution must be to another organization that is itself exempt under Section 501(c)(3) of the Internal Revenue Code, or to a governmental entity. This is a fundamental principle of nonprofit law, often referred to as the “trust fund doctrine” or “cy pres” principle in a broader sense, ensuring that charitable assets are not diverted for private gain. Therefore, a Rhode Island nonprofit dissolving and having remaining assets must ensure these assets are transferred to an organization with a similar charitable purpose or to a government entity.

In Rhode Island, a nonprofit corporation intending to engage in activities that could be construed as lobbying or influencing legislation must adhere to specific disclosure and registration requirements. Rhode Island General Laws § 2-12-1.1 outlines the definition of lobbying, which includes direct communication with a public official or agency for the purpose of influencing legislative action, administrative action, or the outcome of a governmental decision. Section 2-12-1.2 mandates that individuals or organizations engaging in such activities must register with the Secretary of State and file periodic reports detailing their lobbying expenditures and the specific legislative or administrative matters they are attempting to influence. Failure to comply can result in penalties. The scenario presented involves a Rhode Island nonprofit, “Ocean State Conservation Alliance,” which is advocating for specific environmental regulations at the state level. This advocacy directly falls under the definition of influencing administrative action. Therefore, the organization is legally obligated under Rhode Island law to register as a lobbyist and report its expenditures related to this advocacy. The question tests the understanding of when lobbying disclosure requirements are triggered for nonprofits in Rhode Island, specifically concerning their engagement with state administrative processes.