Who actually owns the NHRA (1 Viewer)
- Thread starter Crazy
- Start date
Paul
Nitro Member
The NHRA is a 501(c)(6) "business league" non-profit "non-stock" corporation.
Since it is a non-profit it can not have any private ownership, and it has no shares of stock. Its thus a stand alone entity that owns assets and has to abide by 501(c)(6) rules.
The NHRA can never be sold as a whole, but assets it owns can be sold as long as the proceeds for the sale are only used to benefit its members in the manner that was described when the organization was founded. For the NHRA, this was basically to enable and encourage safe forms of drag racing.
When it was originally founded, the original bylaws (the rules that stated how the organization was to be run) clearly stated that members would elect the board of directors for 3 year terms. These board of directors then run the company, and were also responsible for hiring the officers (President, etc.).
This is the way most "business league" non-profits are expected to run. If the members feel the organization is not working well, through elections they can put new board members in place to make it work better.
However, in 1981 the NHRA conducted a membership vote that "neutered" the members by removing their ability to elect the board of directors, changing the bylaws so the board members elected themselves.
This is unfortunately not a good situation as the current board totally controls the NHRA and there is currently no way for members the remove board members (and thus officers as well) if the NHRA is being run poorly.
However, I believe it may be possible to legally challenge this "neutering" vote that the board conducted in 1981. Under California law any change to membership voting rights in a non-profit organization has to be performed in a very specific manner, and the results of this vote must be documented in a specific manner in the organizations bylaws. Its not clear to me if this voting process and documentation was correctly performed by the NHRA. In addition its generally expected that business league non-profits are ultimately controlled through voting rights by its members and the NHRA may not be able to legally justify removing all members voting rights.
There are some other issues where the NHRA appears to be out of compliance with 501(c)(6) guidelines and restrictions (and some of this information has come to me recently from an individual who wishes to stay anonymous).
The NHRA compensation levels for some board members appears to be excessively high for a non-profit organization (although its not surprising given the "closed group" nature of the board).
As a business league the NHRA is restricted to having primarily "professional" members that can legitimately verify that they are engaged in drag racing as a profitable business, but most NHRA members don't satisfy this requirement.
In summary I feel the current "closed group" control of the NHRA is not a good thing as there is no way for members to force a board member or officer to be removed if he is doing a poor job.
I feel it may be possible to challenge the vote that removed members voting rights, but it would either require a good number of NHRA members to band together to challenge the NHRA as a group or a single (or few) number of members that had fat pockets and were willing to fund a legal battle.
Since it is a non-profit it can not have any private ownership, and it has no shares of stock. Its thus a stand alone entity that owns assets and has to abide by 501(c)(6) rules.
The NHRA can never be sold as a whole, but assets it owns can be sold as long as the proceeds for the sale are only used to benefit its members in the manner that was described when the organization was founded. For the NHRA, this was basically to enable and encourage safe forms of drag racing.
When it was originally founded, the original bylaws (the rules that stated how the organization was to be run) clearly stated that members would elect the board of directors for 3 year terms. These board of directors then run the company, and were also responsible for hiring the officers (President, etc.).
This is the way most "business league" non-profits are expected to run. If the members feel the organization is not working well, through elections they can put new board members in place to make it work better.
However, in 1981 the NHRA conducted a membership vote that "neutered" the members by removing their ability to elect the board of directors, changing the bylaws so the board members elected themselves.
This is unfortunately not a good situation as the current board totally controls the NHRA and there is currently no way for members the remove board members (and thus officers as well) if the NHRA is being run poorly.
However, I believe it may be possible to legally challenge this "neutering" vote that the board conducted in 1981. Under California law any change to membership voting rights in a non-profit organization has to be performed in a very specific manner, and the results of this vote must be documented in a specific manner in the organizations bylaws. Its not clear to me if this voting process and documentation was correctly performed by the NHRA. In addition its generally expected that business league non-profits are ultimately controlled through voting rights by its members and the NHRA may not be able to legally justify removing all members voting rights.
There are some other issues where the NHRA appears to be out of compliance with 501(c)(6) guidelines and restrictions (and some of this information has come to me recently from an individual who wishes to stay anonymous).
The NHRA compensation levels for some board members appears to be excessively high for a non-profit organization (although its not surprising given the "closed group" nature of the board).
As a business league the NHRA is restricted to having primarily "professional" members that can legitimately verify that they are engaged in drag racing as a profitable business, but most NHRA members don't satisfy this requirement.
In summary I feel the current "closed group" control of the NHRA is not a good thing as there is no way for members to force a board member or officer to be removed if he is doing a poor job.
I feel it may be possible to challenge the vote that removed members voting rights, but it would either require a good number of NHRA members to band together to challenge the NHRA as a group or a single (or few) number of members that had fat pockets and were willing to fund a legal battle.
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Crazy
Nitro Member
Thanks for the info. It does sound like it could be challenged. But, and it's a big but. There is no one, in the NHRA, that has the money or b--ls to take that on.
Awhile back, wasn't there an invesment group close to buying? Also Smith, has been rumored, on and off, to be interested. What then, were they looking to buy. Who would profit from this sale?
Awhile back, wasn't there an invesment group close to buying? Also Smith, has been rumored, on and off, to be interested. What then, were they looking to buy. Who would profit from this sale?
Paul
Nitro Member
The sale was going to be to a group called HD Partners. By law they (or Bruton Smith) can't buy the entire NHRA, they can only buy some of its assets, so to my best understanding they were planning to buy marketing rights to the pro divisions of the NHRA.
The funds from this sale couldn't go into anybody's pocket, they would have had to been used by the NHRA in accordance with their stated mandate, ie to help support safe drag racing activities.
The fact that the NHRA is a non-profit makes this asset sale complicated and subject to some restrictions, which is likely a factor in making the purchase not so attractive to potential suitors.
I don't agree with your last sentence Paul. From a legal standpoint I don't think there is anything complex about an asset disposition (of course, who would be interested in the assets that don't yield positive cash flow).
From a charter standpoint, you are going to sell assets, possibly sit on a pile of cash, and continue to follow your charter of promoting safe racing to the sportsman.
You've got to keep doing that because the people in control make their money by drawing a paycheck. The residual operation of the NHRA gets a little confusing, but selling profitable assets to a taxable entity . . . easy.
From a charter standpoint, you are going to sell assets, possibly sit on a pile of cash, and continue to follow your charter of promoting safe racing to the sportsman.
You've got to keep doing that because the people in control make their money by drawing a paycheck. The residual operation of the NHRA gets a little confusing, but selling profitable assets to a taxable entity . . . easy.
Bullard Anderson
Nitro Member
Answer on the back page nobody looks at: The Sportsman racers.
Paul
Nitro Member
Jeff, the sale of any asset by a non-profit is subject to that sale being in the best interest of the members given the mandate of the non-profit. The sale of a asset that has long term inherit value to NHRA members for a big pile of cash is not generally an allowed transaction.
For example if the NHRA attempted to sell exclusive marketing rights and trademark rights to the name "NHRA" to an outside company to do anything they wanted with it, this would clearly not be in the best interest of NHRA members and I believe such a sale could be challenged.
But this to some degree was what the HD Partners sale was trying to do. From what I understand they were trying to wack the NHRA marketing rights and trademark rights into 2 pieces with exclusive rights to the the pro component going to HD and the sportsman component staying with the NHRA.
This would have been a complex and messy deal, and I've been told by someone who examined the proxy that it was a very complex transaction exceeding 300 pages in length. I believe this sale also could have been challenged by the members as its not clear that the transaction was in the best interest of NHRA members.
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