Councils Using Home Corporations

Facilities

Terms of Use Agreement and

Charitable Distribution AgreementState Advocates Meeting

Saturday, June 13, 2015

Dallas/Fort Worth Airport MarriottDallas, TexasBrian J. Gedicks

Associate General Counsel

Which came first, the council or the corporation?

• Local Councils pre-existed home corporations.

• Home corporations meant to support the fraternal and charitable mission of Local Councils.

• The “permanent home” movement began in the last decade of the 19th Century.

• Members began on their own initiative to form home corporations to purchase properties and build permanent homes for their councils.

Where did the funds come from in the first place?

• The original funds to purchase home corporation property and building came from individual members of Local Council, before there was any home corporation.

• Fundraising was conducted by members of Local Councils.

• Held banquets and sold bonds (e.g., in 1921, Babe Ruth purchased a bond).

• Subsequent new members invested their own personal wealth and sweat equity.

Challenges for Home Corporations• Loss of interest in charitable bingo

because of state lotteries and professional gaming/casinos.

• Third-party rentals no longer economically viable because of competitively priced professional banquet and hotel facilities.

• Increased property taxes, insurance premiums, legal liabilities.

• Diminished interest in maintaining buildings among men with young families.

• Some Home Corporations have already sold their property and dissolved.

• Proceeds from sale of home corporation properties have become a source of dispute among members.

Handbook For Councils Using Home Corporation Facilities

• Promotes the mission and identity of Knights of Columbus.

• Resolve and/or prevent disputes between a Local Council and Home Corporation.

• Reduce distractions from the Local Council’s charitable and fraternal purposes.

• Carry out activities in a mutually beneficial spirit of cooperation.

• Recognize that Local Councils and Home Corporations are separate and distinct entities.

Basis for Agreements• According to the Charter of the Knights of

Columbus, Local Councils are governed by the by-laws, rules and regulations of Knights of Columbus.

• Supreme Council Agreements Resolution No. 340 (August 2014)– “Supreme Council is hereby adopting a

policy that Subordinate Units using premises of Home Corporations for meetings and other functions must have a signed terms of use agreement and charitable distribution agreements in place with the Home Corporation.”

• Resolution No. 340 also required that “unless there exists a compelling reason to the contrary, it is the policy of the Supreme Council that all Subordinate Units which use Home Corporation facilities shall implement the Model Agreements.”

Terms of Use Agreement• Annual fee

• Five-year term

• Use of space

• Insurance

• Indemnification

• Trademark ownership

• Dispute resolution

• Event Rental Agreement Addendum

• Guidelines for display of trademarks

Separate Legal Entities in Terms of Use Agreement

• Agreement between Local Council and Home Corporation only

• Knights of Columbus is not a party but can enforce trademark protections.

• Courts will not look behind the “corporate form.”

• But need to maintain separation and deal at arm’s length.

Liability Protection• Local Council and Home

Corporation are required to maintain insurance with minimum coverages.

• Good economic practice to protect both entities.

• Local Council required to have liability insurance even though it meets in Home Corporation premises.

• Home Corporation to have dram shop and automobile liability insurance.

• R.C. Knox & Company has developed a commercial general liability insurance program for councils.

Dispute Resolution• Expeditiously resolves any

disagreements.• Minimizes any acrimony

between entities.• Escalates any issues within

the Order to the State Deputy.• Effort via non-binding

mediation to resolve disagreements.

• Ultimately parties can ask for arbitration.

Purpose of Legacy Payment in Terms of Use Agreement

• “Prenuptial” agreement that only becomes effective if there is a separation

• 5% of gross revenues.

• Encourages continued relationship between Local Council and Home Corporation.

• Takes into account the financial contribution and sacrifice by generations members of the Local Council who built, supported and maintained the Home Corporation.

• Recognizes fraternal and charitable goals of Knights of Columbus which epitomizes shared values of the Order’s members.

Trademark Protection• Name and emblem of Knights of

Columbus are valuable assets.

• Federally registered trademarks.

• Proper use of trademarks is a critical element of protecting the Order’s “brand” and reputation.

• Home Corporations, which are independent legal entities, may not use the Order’s trademarks in their names, on their buildings, or in promotional materials.

• Terms of Use Agreement requires name of Home Corporation and Local Council to be clearly displayed.

Recruitment of New Members

• New members are a key to providing a vibrant and diverse organization – now and for the future.

• New members bring in a great deal of energy to existing programs and generate ideas for new programs.

• Terms of Use Agreement encourages Home Corporation to assist Local Councils to recruit new members.

What Variables are there in the Terms of Use Agreement?

• Only variables are on the first two pages.

• Annual fee – minimum of $10.

• Annual fee – it is anticipated that the Home Corporation will want to accommodate the Local Council.

• Commencement date.

• Any changes to Terms and Conditions may cause confusion, inconsistencies, and unvcertainty.

Charitable Distribution Agreement• Issues arise when the Home

Corporation makes the decision to dissolve.

• Clarifies how funds and property will be distributed.

• Home Corporations are not required to dissolve – the decision must be made by officers and members of the Home Corporations.

• Agreeing in advance how to settle matters.

• Intended to prevent misunderstandings and disputes.

• Upon dissolution, provides recognition of Local Council’s contribution to corporation by a donation.

• Local Council can use funds for charitable purposes and receive credit on audit form.

Charitable Distribution Agreement

• Home Corporation real estate purchased using contributions from members of Local Councils.

• Three year dissolution period after sale of real property to decide what to do.

• Home Corporation without real property has outlasted its original intended purpose – to serve the fraternal and charitable mission of the Knights of Columbus.

• Proceeds donated to Local Council.

• If Local Council has dissolved prior to the home corporation, then home corporation makes donation to a Catholic Charity.

Home Corporations Without Property

• Charitable Distribution Agreement contemplates that Home Corporation still owns real property.

• If home corporation property already sold at time of agreement, three year dissolution period after sale of real property to decide what to do commences at time of Charitable Distribution Agreement is signed.

• Preferable to donate proceeds from sale to a Catholic Charity through Local Council and in the name of the Local Council.

• This honors the legacy of generations of members of the Local Council

• Ensures that Local Councils properly receives recognition for the donation.

• Fulfills the original corporate purpose of the Home Corporation: to serve the mission and identity of the Knights of Columbus.

Is there any financial benefit to the Supreme Council?

• NO• No financial benefit to Supreme

Council.• Knights of Columbus is financially

secure Fraternal Benefit Society that sells life insurance products.

• Goals of introducing agreements are fraternal and charitable.

• Help Local Councils and Home Corporations solve their own problems without Supreme Council intervention.

• Objective is that any proceeds from sale should be contributed to local parish or other local Catholic charity in the name of the Local Council.

Fourth Degree Assembly

• For Terms of Use Agreement, but not Charitable Distribution Agreement.

• Will give both parties protection with regard to insurance and indemnification.

• Can enter into sublease from Local Council.

• Only Local Council should enter into Charitable Distribution Agreement.

Questions?