Can a Not-for-Profit Membership Corporation Be Created as a 'Shell' Corporation?

Liberty University Law Review, 11(1), 1-32.

31 Pages Posted: 27 Nov 2014 Last revised: 24 Mar 2017

Date Written: January 1, 2016

Abstract

Can an Illinois not-for-profit corporation whose articles of incorporation creates members and whose members have an unrestricted right to vote and whose members elected officers, and which received income from members’ dues, later claim it never had any members because it was only a “shell corporation”? This inquiry focuses on the Illinois not-for-profit corporation as an example. However, the question is important not just for Illinois, but for all jurisdictions with similar not-for-profit corporation laws. Due to the high risk of fraud, the misappropriation of funds, or the misuse of assets, and applying basic principles of statutory construction it must be concluded that the Illinois state legislature did not intend non-for-profit membership corporations to exist as shell corporations. Nevertheless, a potentially dangerous precedent has been set in a recent case in which an Illinois not-for-profit membership corporation claimed it was a shell corporation with no members and no assets.

Keywords: Not-for-profit membership corporation, shell corporation

JEL Classification: L31

Suggested Citation

Huber, Wm. Dennis, Can a Not-for-Profit Membership Corporation Be Created as a 'Shell' Corporation? (January 1, 2016). Liberty University Law Review, 11(1), 1-32., Available at SSRN: https://ssrn.com/abstract=2361909 or http://dx.doi.org/10.2139/ssrn.2361909

Wm. Dennis Huber (Contact Author)

Barry University ( email )

Miami, FL

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