Are there any restrictions on the types of investments a nonprofit corporation can make?
Yes, there are restrictions on the types of investments a nonprofit corporation can make in California. Generally speaking, Californian nonprofits are subject to the Nonprofit Corporation Law (Corp. Code §§ 5110-6814). This law provides the legal framework for nonprofits in the state, including what investments they can and cannot make. Nonprofits in California are not allowed to invest their funds in any activity that is not in line with their charitable purpose. Thus, they are usually not allowed to invest funds in stocks, bonds, and other marketable securities or in unrelated businesses. However, the California Nonprofit Corporation Law allows nonprofit organizations to invest in real estate and similar activities that further the organization’s mission. In addition, there are other laws, such as the Uniform Prudent Management of Institutional Funds Act, which governs the management and investments of certain funds held by nonprofits. Under this act, organizations must use reasonable care in selecting and managing investments, considering the organization’s goals and resources. In sum, while there are certain restrictions on the types of investments a nonprofit corporation can make in California, there are also a number of activities they can invest in that help further their charitable purpose.
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