How to File as an Unincorporated Association in Colorado

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					                       Background Briefing for Council:
                      Orbis Cascade Alliance Legal Status
                                   Executive Committee
                                   September 23, 2009

This brief has been prepared to the best of our ability with the information we have
available to-date. The work of the Legal Task Force, Executive Committee, Alliance
Attorney, and the University of Oregon are all on-going, making the information
contained here-in subject to change.

Why are we examining our legal status?

Consideration of our legal status and relationship with our long time partner, the
University of Oregon, began to be discussed almost two years ago. At that time the
UO’s Deputy General Counsel and Special Assistant Attorney General raised the
question of liability for contracts the University was vetting and signing on our behalf.
The Oregon Department of Justice, in an effort to clarify roles and manage risk for state
institutions, advised UO counsel that he could not provide legal advice or services to
any entity other than UO. This immediately raised the question of the structure of our
relationship with the UO and the MOU which defines the services they are providing to
the Alliance. Because we are not an integrated entity of the UO, an unincorporated
association, or an independent non-profit corporation, the University requested we
clarify our status so they would know how to structure a business relationship with us.
Through discussions with UO we have come to understand the legally fuzzy status of
the Alliance and with that, the potential liability for the Executive Director, Executive
members and each Alliance member.

The Executive Committee determined we needed independent legal counsel to help us
examine the issues and develop a course of action. It was quite clear from the
conversations with the three attorneys we interviewed in the course of selecting counsel
that none would recommend anything other than our becoming an independent non-
profit corporation. This fits with the conclusions EC has reached, since neither
becoming fully part of the UO (which would compromise our ability to make independent
decisions in the best interest of the Alliance and may restrict how our funds are
handled) nor an unincorporated association (which is a legally murky status) would
serve the Alliance well.

The UO has been a good partner and steward for the Alliance and further defining our
legal status will only serve us well in this relationship over the longer term. Our
conversations with UO, including those around restructuring the MOU, have been
collegial and constructive in our mutual efforts to gain clarity for both parties. Becoming
an independent non-profit corporation should also provide us with additional
opportunities as we move forward with initiatives in our strategic agenda, giving us
latitude in decisions we do not now have.

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Expected changes

The principle we are following is to make those changes legally necessary to create an
effective non-profit corporation while preserving the best of what makes the Alliance
work so well. Thus, in many areas we are planning little or no change. The following
summarizes our sense of likely outcomes as of this date but many aspects are still
under consideration.

What will remain the same?

The laws for creating non-profit organizations provide great latitude and, as a result,
most key aspects of Alliance governance, policies, procedures, and traditions, can be
preserved. The University of Oregon and Alliance Executive Committee are also
interested in having the UO continue to provide certain key services to the Alliance.
The nature of those services will be detailed in a new MOU between the Alliance and

Membership, role of Council, and voting
If approved by Council, the Orbis Cascade Alliance will be formed as a non-profit
corporation with institutions as members and library directors serving on Council (the
Board of Directors). Council will continue to determine fees and budget and make all
major decisions, with voting based on one vote per member institution.

Services, strategic agenda, committees, task forces, etc.
The services, mission, membership structure, and all activities of the Alliance will
continue in their present form.

Staff and office space
Staff will continue to be employees of the UO and continue to occupy offices in the
Knight Library. The ability of the Alliance to participate in the UO human resources
infrastructure and benefits is a significant advantage and key aspect of the Alliance’s
continued success.

Location of funds
The question of where Alliance funds should reside is an area of active discussion.
Funds may be moved to an account outside the UO or could continue to be
administered through the UO financial information system. One possibility is that the
reserve may be deposited in an outside account with operations funds annually moved
to the UO for expenditure.

What will change?

Legal counsel
The Alliance will need to secure legal counsel for selective review of contracts and other
legal agreements. UO will not be able to represent the Alliance.

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Executive Committee membership
Addition of two new members of EC: Secretary and Treasurer.

Officers of the Corporation
Designation of officers, most likely the Chair, Chair-elect, Secretary, Treasurer and
Executive Director.

Tax filing
Annual filing of IRS Form 990: Return of Organization Exempt from Income Tax.

Contracts with vendors, MOUs with libraries, etc. will be created in the name of the
“Orbis Cascade Alliance” and Alliance officers or Executive Director will sign on behalf
of the Alliance (i.e., no longer “State of Oregon” signed by UO Purchasing and Contract
Services). This change means that the Alliance will not be subject to Oregon
purchasing and contracting rules for public agencies, including Attorney General review,

Costs and Membership fees
It is too soon to know the full financial impact of incorporation. It is likely that some
efficiencies will be realized (e.g., time and effort required to create and finalize
contracts) but the cost of legal Council and UO services will almost certainly increase.
We do know that the Alliance will need to purchase general liability insurance at an
approximate annual cost of $2,000 (already included in the FY10 budget).

What is the timeline and process?

Several aspects are under active consideration by EC, the Legal Task Force, our
attorney, and UO. Chief among these are the Articles of Incorporation, Bylaws, MOU
between the Alliance and Members, and an additional MOU between the Alliance and
UO describing services for the Alliance. EC is committed to providing Council with
sufficient time to review documents and consult on campus as needed, with the
understanding that our present structure must change in the near future. Our
experience to date indicates that attorneys and financial officers will probably be much
more comfortable with the clarity of a corporation than the legally murky nature of an
unincorporated association.

Who is providing legal advice to the Orbis Cascade Alliance?

The Legal Task Force (Dalia Corkrum, Deb Dancik, Jay Starratt, Helen Spalding) and
John Helmer interviewed three attorneys recommended by member institutions and
selected Terrence (Terry) R. Pancoast of Stoel Rives LLP in Portland. We are quite
pleased with Terry’s advice and draft documents.

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How are other consortia organized?

In the U.S., many consortia exist as part of one member (private or public) or state
government and many others are incorporated as non-profit corporations.
Unincorporated consortia are often either informal or centrally funded with legal status
and funding specified in state legislation. Those that are incorporated tend to offer a
wide range of services and are funded via membership fees. Examples of incorporated
consortia include the Five Colleges Consortium, Colorado Alliance, Statewide California
Electronic Licensing Consortium (SCELC), Washington Research Library Consortium
(WRLC), and Lyrasis (formed through merger of PALINET, SOLINET, and NELINET).
In general, consortia tend to continue in whatever form they are created and change is
relatively rare. Given the legal ambiguity and contracting complexity of having a state
agency serve as both a member and host, it is common to hear of such groups
exploring incorporation.

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