The Tax-Exempt Board Fiduciary Duties in the Context of Evaluating Strategic Alternatives and Sales

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Written by Scott Becker
Friday, 18 January 2008
A recent New York State hospital transaction highlights the challenging problem which the Board of Directors of a not-for-profit institution faces in the context of a sales transaction.¹ In Manhatten Eye, Ear & Throat Hospital ("MEETH"), the Court denied the petitiion for judical authorization to sell substantially all of the assets of the Manhatten Eye, Ear & Throat Hospital. The Court held that the Manhatten Eye, Ear & Throat Hospital Board had not fulfilled its duties to the not-for-profit corporation. In contrast to a number of other cases involving the sale of not-for-profit assets, the Board was not criticized for failing to find the highest bidder for entering into self-dealing or self-interested transactions. Rather, the Board was criticized for not fulfilling its "duties of obedience" to the corporation's charitable purposes. Download the low resolution pdf here.

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