Are there any restrictions on the types of investments a nonprofit can make?
Yes, there are restrictions on the types of investments a nonprofit organization can make in California. In accordance with California law, nonprofits are only allowed to make investments that are prudent and lawful. This means that any investments must be reasonable, have a reasonable degree of safety, and not put the organization’s assets at risk. In addition, California requires that nonprofit organizations provide reasonable care, skill, and caution when making investments. The organization must also diversify their investments to protect against potential losses. California law also prohibits nonprofit organizations from engaging in certain types of investments, such as those involving derivatives, commodities, and certain types of securitized debt. Finally, there are restrictions on how and how much a nonprofit can lend money. California law prohibits nonprofits from lending money to their directors, officers, or employees, and the organization must adhere to a loan-making policy that outlines the terms of the loan, repayment schedule, and interest rate. Nonprofits are also prohibited from lending money that would exceed the fair market value of the organization’s assets. In conclusion, there are several restrictions on the types of investments a nonprofit organization can make in California. These restrictions are in place to protect the organization’s assets, so that the organization can fulfill its mission and obligations to its stakeholders.
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