Yesterday's post focused on a California bill, AB 1229 (Haney), that would create a new Decentralized Nonprofit Association Law. Today's post drills down on what I see as fundamental flaw in the bill. In addition to defining a "Decentralized Nonprofit Association", the bill would impose some basic rules governing the liability of members and governance. As I pointed out yesterday, however, the bill makes no attempt to establish the raison d'etre for the application of California law.
A general partnership is similar to a Decentralized Nonprofit Association in that no filing with the state is required for its formation. The California Uniform Partnership Act of 1994, however, does provide a jurisdictional "hook" for its application. With two exceptions involving limited liability partnerships, the law of the jurisdiction in which a partnership has its principal office governs relations among the partners and between the partners and the partnership. Cal. Corp. Code § 16106(a). This choice of law rule, however, noticeably does not apply to relationships between the partnership and third persons.
No such choice of law rule is found in the proposed Decentralized Nonprofit Association Law. Even if the law included such a provision, it would not be terribly helpful because a Decentralized Nonprofit Association by its very nature would most likely not have an office anywhere, much less a principal office. Thus, a key question is how California could purport to impose liability and governance rules on Decentralized Nonprofit Association without requiring that there be some association with California. If there is no there there, how can California claim that it is here?
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