08 LC 29
3218S
House
Bill 972 (COMMITTEE SUBSTITUTE)
By:
Representatives Tumlin of the
38th,
Lane of the
167th,
and Lindsey of the
54th
:
A
BILL TO BE ENTITLED
AN ACT
AN ACT
To
amend Chapter 15 of Title 44 of the Official Code of Georgia Annotated, relating
to the management of institutional funds, so as to enact the "Uniform Prudent
Management of Institutional Funds Act"; to provide standards for charities to
use in managing investments and spending from endowments; to provide for the
management of institutional funds; to provide for a short title; to provide for
applicability; to provide for related matters; to provide an effective date; to
repeal conflicting laws; and for other purposes.
BE
IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:
SECTION
1.
Title
44 of the Official Code of Georgia Annotated, relating to property, is amended
by revising Chapter 15, relating to the management of institutional funds, in
its entirety as follows:
"CHAPTER
15
44-15-1.
This
chapter shall be known and may be cited as the 'Uniform Prudent Management of
Institutional Funds Act.'
44-15-2.
As
used in this chapter, the term:
(1)
'Charitable purpose' means the relief of poverty, the advancement of education
or religion, the promotion of health, the promotion of a governmental purpose,
or any other purpose the achievement of which is beneficial to the
community.
(2)
'Endowment fund' means an institutional fund, or any part thereof, that, under
the terms of a gift instrument, is not wholly expendable by the institution on a
current basis. The term shall not include assets that an institution designates
as an endowment fund for its own use.
(3)
'Gift instrument' means a record or records, including an institutional
solicitation, under which property is granted to, transferred to, or held by an
institution as an institutional fund.
(4)
'Institution' means:
(A)
A person, other than an individual, organized and operated exclusively for
charitable purposes;
(B)
A government or governmental subdivision, agency, or instrumentality, to the
extent that it holds funds exclusively for a charitable purpose;
and
(C)
A trust that had both charitable and noncharitable interests, after all
noncharitable interests have terminated.
(5)
'Institutional fund' means a fund held by an institution exclusively for
charitable purposes. The term shall not include:
(A)
Program related assets;
(B)
A fund held for an institution by a trustee that is not an institution;
or
(C)
A fund in which a beneficiary who is not an institution has an interest, other
than an interest that could arise upon violation or failure of the purposes of
the fund.
(6)
'Person' means an individual, corporation, business trust, estate, trust,
partnership, limited liability company, association, joint venture, public
corporation, government or governmental subdivision, agency, or instrumentality,
or any other legal or commercial entity.
(7)
'Program related asset' means an asset held by an institution primarily to
accomplish a charitable purpose of the institution and not primarily for
investment.
(8)
'Record' means information that is inscribed on a tangible medium or that is
stored in an electronic or other medium and is retrievable in perceivable
form.
44-15-3.
(a)
Subject to the intent of a donor expressed in a gift instrument or any express
written agreement between the donor and the institution, an institution, in
managing and investing an institutional fund, shall consider the charitable
purposes of the institution and the purposes of the institutional
fund.
(b)
In addition to complying with the duty of loyalty imposed by law other than this
chapter, each person responsible for managing and investing an institutional
fund shall manage and invest such fund in good faith and with the care an
ordinarily prudent person in a like position would exercise under similar
circumstances, considering the purposes, terms, distribution requirements, and
other circumstances of the institutional fund.
(c)
In managing and investing an institutional fund, an institution:
(1)
May incur only costs that are appropriate and reasonable in relation to the
assets, the purposes of the institution and the institutional fund, and the
skills reasonably available to the institution; and
(2)
Shall make a reasonable effort to verify facts relevant to the management and
investment of such fund.
(d)
An institution may pool two or more institutional funds for purposes of
management and investment.
(e)
Except as otherwise provided by a gift instrument, the following rules
apply:
(1)
In managing and investing an institutional fund, the following factors, if
relevant, shall be considered:
(A)
General economic conditions;
(B)
The possible effect of inflation or deflation;
(C)
The expected tax consequences, if any, of investment decisions or
strategies;
(D)
The role that each investment or course of action plays within the overall
investment portfolio of such fund;
(E)
The expected total return from income and the appreciation of
investments;
(F)
Other resources of the institution;
(G)
The needs of the institution and such fund to make distributions and to preserve
capital; and
(H)
An asset´s special relationship or special value, if any, to the charitable
purposes of the institution or to the donor;
(2)
Management and investment decisions about an individual asset shall not be made
in isolation but rather in the context of the institutional fund´s
portfolio of investments as a whole and as a part of an overall investment
strategy having risk and return objectives reasonably suited to the
institutional fund and to the institution;
(3)
An institution may invest in any kind of property or type of investment
consistent with this Code section;
(4)
An institution shall reasonably manage the risk of concentrated holdings of
assets by diversifying the investments of the institutional fund or by using
some other appropriate mechanism, except as provided in this paragraph, as
follows:
(A)
The duty imposed by this paragraph shall not apply if the institution reasonably
determines that, because of special circumstances, or because of the specific
purposes, terms, distribution requirements, and other circumstances of the
institutional fund, the purposes of such fund are better served without
complying with the duty. For purposes of this paragraph, special circumstances
shall include an asset´s special relationship or special value, if any, to
the charitable purposes of the institution or to the donor;
(B)
No person responsible for managing and investing an institutional fund shall be
liable for failing to comply with the duty imposed by this paragraph to the
extent that the terms of the gift instrument or express written agreement
between the donor and the institution limits or waives the duty;
and
(C)
The governing board of an institution may retain property contributed by a donor
to an institutional fund for as long as the governing board deems
advisable;
(5)
Within a reasonable time after receiving property, an institution shall make and
carry out decisions concerning the retention or disposition of the property or
to the rebalancing of a portfolio, in order to bring the institutional fund into
compliance with the purposes, terms, and distribution requirements of the
institution or the institutional fund as necessary to meet other circumstances
of the institution or the institutional fund and the requirements of this
chapter; and
(6)
A person that has special skills or expertise, or is selected in reliance upon
the person´s representation that such person has special skills or
expertise, has a duty to use those skills or expertise in managing and investing
institutional funds.
44-15-4.
(a)
Subject to the intent of a donor expressed in the gift instrument or to any
express written agreement between a donor and an institution, an institution may
appropriate for expenditure or accumulate assets of an endowment fund as the
institution determines shall be prudent for the uses, benefits, purposes, and
duration for which the endowment fund is established. Unless stated otherwise
in the gift instrument, the assets in an endowment fund shall be donor
restricted assets until appropriated for expenditure by the institution. In
making a determination to appropriate or accumulate assets, the institution
shall act in good faith, with the care that an ordinarily prudent person in a
like position would exercise under similar circumstances, and shall consider, if
relevant, the following factors:
(1)
The duration and preservation of the endowment fund;
(2)
The purposes of the institution and the endowment fund;
(3)
General economic conditions;
(4)
The possible effect of inflation or deflation;
(5)
The expected total return from income and the appreciation of
investments;
(6)
Other resources of the institution; and
(7)
The investment policy of the institution.
(b)
To limit the authority to appropriate assets for expenditure or accumulation
under subsection (a) of this Code section, a gift instrument shall specifically
state the limitation.
(c)
Terms in a gift instrument designating a gift as an endowment, or a direction or
authorization in the gift instrument to use only income, interest, dividends, or
rents, issues, or profits, or to preserve the principal intact, or other words
of similar meaning shall:
(1)
Create an endowment fund of permanent duration, unless otherwise provided by the
gift instrument for limiting the duration of such fund; and
(2)
Not otherwise limit the authority to appropriate assets for expenditure or
accumulation under subsection (a) of this Code section.
44-15-5.
(a)
Subject to any specific limitation set forth in a gift instrument or in law
other than this chapter, an institution may delegate to an external agent the
management and investment of an institutional fund to the extent that an
institution could prudently delegate under the circumstances. An institution
shall act in good faith, with the care that an ordinarily prudent person in a
like position would exercise under similar circumstances, in:
(1)
Selecting an agent;
(2)
Establishing the scope and terms of the delegation, consistent with the purposes
of the institution and the institutional fund; and
(3)
Periodically reviewing the agent´s actions in order to monitor the
agent´s performance and compliance with the scope and terms of the
delegation.
(b)
In performing a delegated function, an agent owes a duty to the institution to
exercise reasonable care to comply with the scope and terms of the
delegation.
(c)
An institution that complies with subsection (a) of this Code section shall not
be liable for the decisions or actions of an agent for the performance of a
delegated function.
(d)
By accepting the delegation of a management or investment function from an
institution that is subject to the laws of this state, an agent submits to the
jurisdiction of the courts of this state in all proceedings arising from or
related to the delegation or the performance of the delegated
function.
(e)
An institution may delegate management and investment functions to its
committees, officers, or employees as otherwise authorized by law.
44-15-6.
(a)
If the donor or a donor´s designee consents in a record, an institution may
release or modify, in whole or in part, a restriction contained in a gift
instrument on the management, investment, or purpose of an institutional fund.
A release or modification may not allow an institutional fund to be used for a
purpose other than a charitable purpose of the institution.
(b)
The court, upon application of an institution, may modify a restriction
contained in a gift instrument regarding the management or investment of an
institutional fund if the restriction has become impracticable or wasteful, if
it impairs the management or investment of such fund, or if, because of
circumstances not anticipated by the donor, a modification of a restriction will
further the purposes of such fund. The institution shall notify the Attorney
General of the application, and the Attorney General shall be given an
opportunity to be heard. To the extent practicable, any modification shall be
made in accordance with the donor´s probable intention.
(c)
If a particular charitable purpose or a restriction contained in a gift
instrument on the use of an institutional fund becomes unlawful, impracticable,
impossible to achieve, or wasteful, the court, upon application of an
institution, may modify the purpose of such fund or the restriction on the use
of such fund in a manner consistent with the charitable purposes expressed in
the gift instrument. The institution shall notify the Attorney General of the
application, and the Attorney General shall be given an opportunity to be
heard.
(d)
If an institution determines that a restriction contained in a gift instrument
on the management, investment, or purpose of an institutional fund is unlawful,
impracticable, impossible to achieve, or wasteful, the institution, 60 days
after notification to the Attorney General, may release or modify the
restriction, in whole or part, if:
(1)
The institutional fund subject to the restriction has a total value of less than
$100,000.00;
(2)
More than 20 years have elapsed since the institutional fund was established;
and
(3)
The institution uses the property in a manner consistent with the charitable
purposes expressed in the gift instrument.
44-15-7.
Compliance
with this chapter shall be determined in light of the facts and circumstances
existing at the time a decision is made or action is taken, and not by
hindsight. This chapter applies to institutional funds existing on or
established after July 1, 2008. As applied to institutional funds existing on
July 1, 2008, this chapter governs only decisions made or actions taken on or
after that date. This chapter shall not authorize electronic delivery of any
legally required notice.
44-15-8.
In
applying and construing this uniform act, consideration shall be given to the
need to promote uniformity of the law with respect to its subject matter among
states that enact it."
SECTION
2.
This
Act shall become effective on July 1, 2008.
SECTION
3.
All
laws and parts of laws in conflict with this Act are repealed.