A Brief Overview of Maryland's New Law, "Charitable Enforcement and Protection of Charitable Assets"

Date: December 18, 2014

In 2014, Title 6.5, entitled “Protection of Charitable Assets,” was added to the Business Regulation Article of the Annotated Code of Maryland.  This new law went into effect on June 1, 2014. 

The new title relates to “charitable assets” that are given, received or held for a “charitable purpose,” and both terms are defined broadly.  The statute provides that the Maryland Attorney General represents the public with regard to the protection of charitable assets.  

In addition to investigation and subpoena powers, it provides that the Maryland Attorney General has enforcement powers in the event a “misapplication, diversion or waste” of a “charitable asset” or a “breach of fiduciary or other legal duty in the governance, management, or administration” of a “charitable asset” is determined to have occurred.  

Enforcement may include actions to prevent or remedy the problem, or to recover damages.  Actions can apply to any person (e.g. an entity or individual) and can include remedies such as restraining orders, payments of replacement value by the responsible party, or transfers of assets to another charitable organization.  In addition, in the event the Maryland Attorney General and Secretary of State determine that there are reasonable grounds to believe that a violation has occurred, the matter may be resolved by entering into a settlement agreement with the responsible parties that would remedy the alleged violation.  

It is important to note that Title 6.5 contains a section providing that enforcement actions and remedies under the Title are subject to immunity and limitations on liability that are otherwise available under State and Federal law, or at common law.  Further, the statute contains a three year statute of limitations on enforcement actions (i.e., actions must be brought within three years after the alleged violation occurred).  

Finally, the Act that added Title 6.5 to the Business Regulations Article (known as Chapter 654) also provides for the creation and funding of a “Charitable Enforcement Fund” to support the actions of the Maryland Attorney General and Secretary of State to administer and enforce the provisions of Title 6.5.