Sample Conflict of Interest Policy California Nonprofit

CONFLICT OF INTEREST POLICY AND PROCEDURES

Document ID: CORP-GOV-COI-001
Effective Date: [Date]
Version: 1.0
Governing Jurisdiction: State of California

STATUTORY & LEGAL COMPLIANCE NOTICE

This document is drafted to comply with the California Nonprofit Public Benefit Corporation Law (California Corporations Code § 5233) and the Internal Revenue Code (IRC) § 4958. This template is for informational purposes and does not constitute specific legal advice. Nonprofits should have this document reviewed by qualified legal counsel to ensure alignment with specific Articles of Incorporation, Bylaws, and current state/federal filing requirements.

1. PURPOSE AND SCOPE

The purpose of this Conflict of Interest Policy is to protect the tax-exempt status of [Nonprofit Legal Name] (the "Corporation") when it is contemplating entering into a transaction or arrangement that might benefit the private interest of an officer or director of the Corporation or might result in a possible excess benefit transaction. This policy is intended to supplement but not replace any applicable state and federal laws governing conflict of interest applicable to nonprofit and charitable corporations.

2. DEFINITIONS

2.1 Interested Person. Any director, principal officer, or member of a committee with governing board-delegated powers, who has a direct or indirect financial interest, as defined below, is an interested person. 2.2 Financial Interest. A person has a financial interest if the person has, directly or indirectly, through business, investment, or family: (a) An ownership or investment interest in any entity with which the Corporation has a transaction or arrangement; (b) A compensation arrangement with the Corporation or with any entity or individual with which the Corporation has a transaction or arrangement; or (c) A potential ownership or investment interest in, or compensation arrangement with, any entity or individual with which the Corporation is negotiating a transaction or arrangement.

3. PROCEDURES

3.1 Duty to Disclose. In connection with any actual or possible conflict of interest, an interested person must disclose the existence of the financial interest and be given the opportunity to disclose all material facts to the directors and members of committees with governing board-delegated powers considering the proposed transaction or arrangement. 3.2 Recusal. After disclosure of the financial interest and all material facts, and after any discussion with the interested person, he/she shall leave the governing board or committee meeting while the determination of a conflict of interest is discussed and voted upon. The remaining board or committee members shall decide if a conflict of interest exists. 3.3 Addressing the Conflict. (a) An interested person may make a presentation at the board or committee meeting, but after the presentation, they shall leave the meeting during the discussion of, and the vote on, the transaction or arrangement involving the possible conflict of interest. (b) The chairperson of the board or committee shall, if appropriate, appoint a disinterested person or committee to investigate alternatives to the proposed transaction or arrangement. (c) After exercising due diligence, the board or committee shall determine whether the Corporation can obtain with reasonable efforts a more advantageous transaction or arrangement from a person or entity that would not give rise to a conflict of interest.

4. VIOLATIONS OF THE CONFLICT OF INTEREST POLICY

If the board or committee has reasonable cause to believe a member has failed to disclose actual or possible conflicts of interest, it shall inform the member of the basis for such belief and afford the member an opportunity to explain the alleged failure to disclose. If, after hearing the member's response and after making further investigation as warranted by the circumstances, the board or committee determines the member has failed to disclose an actual or possible conflict of interest, it shall take appropriate disciplinary and corrective action.

5. RECORDS OF PROCEEDINGS

The minutes of the governing board and all committees with board-delegated powers shall contain: (a) The names of the persons who disclosed or otherwise were found to have a financial interest in connection with an actual or possible conflict of interest, the nature of the financial interest, any action taken to determine whether a conflict of interest was present, and the board’s or committee’s decision as to whether a conflict of interest in fact existed. (b) The names of the persons who were present for discussions and votes relating to the transaction or arrangement, the content of the discussion, including any alternatives to the proposed transaction or arrangement, and a record of any votes taken in connection with the proceedings.

6. ANNUAL STATEMENTS

Each director, principal officer, and member of a committee with governing board-delegated powers shall annually sign a statement which affirms such person: (a) Has received a copy of the conflicts of interest policy; (b) Has read and understands the policy; (c) Has agreed to comply with the policy; and (d) Understands the Corporation is charitable and in order to maintain its federal tax exemption it must engage primarily in activities which accomplish one or more of its tax-exempt purposes.

7. EXECUTION & SIGNATURE

By signing below, the undersigned acknowledges receipt, understanding, and agreement to be bound by the terms set forth in this Policy.

FOR [NONPROFIT LEGAL NAME]: Signature: _____________________________________ Printed Name: [Authorized Signatory Name] Title: [Title / Role] Company: [Nonprofit Legal Name] Date: [Date]

FOR [BOARD MEMBER / OFFICER NAME]: Signature: _____________________________________ Printed Name: [Signatory Name] Title: [Title / Role] Date: [Date]

STEP-BY-STEP EXECUTION & FILING GUIDE

1. Preparation: Open this document in your word processor. Replace all [Bracketed Text] with the specific entity and individual information.
2. Board Approval: Before implementation, present this policy at a formal Board Meeting. Ensure the adoption is recorded in the official Corporate Minutes, citing the date of approval.
3. Signatory Verification: Ensure the person signing for the Corporation is authorized via the Bylaws (e.g., Secretary or Board President).
4. Digital Execution: Upload the finalized document to a secure platform (DocuSign/Adobe Sign). Ensure the audit trail (IP logs, timestamps) is preserved in the digital transaction report.
5. Record Retention: Under California law, maintain this signed policy and all annual disclosure statements in the Corporate Minute Book. These records must be produced upon audit by the California Attorney General’s Registry of Charitable Trusts or the IRS.
6. Annual Refresh: Distribute this document to all new directors/officers upon appointment and obtain signature renewals every fiscal year.