The Revised Iowa Nonprofit Corporation Act (the “Revised Act”) becomes effective for existing nonprofit corporations on July 1, 2005, unless an election is made to have it apply on an earlier date, which may be as early as July 1, 2004. It becomes effective on January 1, 2005 for nonprofit corporations organized after January 1, 2005. It will replace the existing Iowa Nonprofit Corporation Act currently found at Chapter 504A of the Iowa Code (the “Existing Act”).

The Revised Act recognizes the following three types of nonprofit corporations:

• A “public benefit corporation” which is a nonprofit corporation organized for a public or charitable purpose and which upon dissolution must distribute its assets to a public benefit corporation, the United States, a state or a person recognized as exempt under section 501(c)(3) of the Internal Revenue Code.
  
• A “religious corporation” which is a nonprofit corporation that is organized primarily or exclusively for religious purposes.
  
• A “mutual benefit corporation”, which is a nonprofit corporation that is not a public benefit corporation or a religious corporation.

The Revised Act treats these different types of nonprofit corporations differently in some respects. Some examples of such differences in the treatment are listed below:

• Public benefit and religious corporations cannot purchase or allow for the transfer of membership interests. Mutual benefit corporations can allow for such purchases and transfers.
  
• Religious corporations are not subject to statutory provisions regarding termination, expulsion or suspension of members.
  
• The duty of care standard expressly recognizes that religious corporation directors may rely on religious officials.
  
• There are limitations concerning merger or dissolution requiring that assets of a public benefit corporation and religious corporations continue to be used for such purposes.

Existing Iowa nonprofit corporations should consider filing an election to have the Revised Act apply to them before July 1, 2005. The Revised Act provides a number of advantages not available under the Existing Act. Some examples of these advantages are listed below:

• Greater flexibility with respect to use of written consents in the place of meetings.
  
• The ability to specify a range concerning the number of directors.
  
• More detailed provisions that provide guidance about procedures to be followed in election of directors, filling board vacancies, resignation and removal of directors and officers, and dealing with conflict of interest situations.
  
• More detailed provisions that provide guidance about duties of directors and officers and the applicable standard of conduct.
  
• Clear authorization for officers to execute documents.
  
• More detailed provisions regarding merger, sale of assets and dissolution.
  
• Greater scope and clarity in statutory provisions intended to shield directors, officers, members or other volunteers from personal liability. The Revised Act eliminates exceptions for breach of the duty of loyalty and failure to act in good faith, the interpretation of which was subject to some legal uncertainty. The only remaining exceptions to the statutory liability shield are 1) receipt of an improper personal benefit, 2) intentional infliction of harm on the corporation or its members, 3) approving a loan or guarantee in violation of statutory restrictions and 4) an intentional violation of criminal law.
  
• The opportunity to include in articles of incorporation provisions to shield directors from personal liability to the corporation or its members for any action taken or for failure to take action with the exceptions described above and providing for permissive or mandatory indemnification by the corporation subject to the exceptions described above.