Suppose you’re considering a real estate loan or transaction involving a non-profit or church, it’s wise to consult with a non-profit attorney to determine whether Attorney General involvement is required. 

https://www.oag.ca.gov/system/files/media/Guide%20for%20Charities.pdf

https://law.justia.com/codes/california/2009/corp/9630-9633.html

https://oag.ca.gov/sites/all/files/agweb/pdfs/charities/pdf/title-11-ch15-999-1-999-5.pdf

https://www.churchlawcenter.com/nonprofit/ca-attorney-general-issues-new-regulations-concerning-reporting-duties-for-charities/

https://www.californianonprofitlaw.com/blog/2019/6/7/california-attorney-general-oversight-of-charities

1.  Core Requirement of § 9633 of the California Corporations Rules:

2.  Notice Requirement by the corporation, including churches and non-profit corporations.

Under California Corporations Code § 9633, a corporation must give written notice to the Attorney General at least 20 days before it sells, leases, conveys, exchanges, transfers, or otherwise disposes of all or substantially all of its assets, unless the Attorney General has issued a written waiver for the transaction 

This rule is designed to ensure oversight and prevent misuse or improper diversion of corporate assets, especially in the context of charitable organizations.

3.  Applicability to Charitable Corporations

The rule applies broadly to corporations, but it has special relevance for charitable corporations and trustees, as clarified in the California Department of Justice’s Initial Statement of Reasons. 

• “Substantially all” is defined as 75% or more of the value of all assets held by the charitable corporation or trust either at the time of notice or during the six months prior.
• This threshold prevents corporations from structuring transactions to avoid triggering the notice requirement.
• If multiple related transactions occur, they are treated as a single transaction for the purpose of determining whether the 75% threshold is met.

4.  Waiver Provision

Corporations may request a waiver from the Attorney General.

The waiver may be granted if:

• The transaction poses no risk to the public interest, and
• The financial burden of providing notice outweighs the public benefit of oversight.

This provision introduces flexibility, especially for routine or low-risk transactions, such as donations between aligned charitable entities.

4.  Regulatory Purpose and Enforcement

The regulation aims to:

• Enable proactive oversight by the Attorney General.
• Prevent fraud, misuse, or self-dealing in asset transactions.
• Ensure that charitable assets are managed in accordance with fiduciary duties and public interest.

Without this notice requirement, the Attorney General would only be able to act after a problematic transaction has occurred.

5.  Economic Impact

The regulation is not expected to have a significant impact on job creation, business formation, or expansion.  Its primary benefit is clarity and predictability for charitable corporations and trustees regarding compliance obligations. 

6.  California Corporations Code § 9633: Oversight of Asset Disposition by Charitable Corporations

California Corporations Code § 9633 mandates that charitable corporations must notify the Attorney General at least 20 days before selling, leasing, or otherwise disposing of all or substantially all of their assets.  This provision ensures regulatory oversight to prevent misuse or diversion of charitable assets.

The threshold for “substantially all” is defined as 75% or more of the corporation’s asset value, either at the time of notice or within the preceding six months.  Related transactions are aggregated to prevent circumvention of the rule.

Corporations may request a waiver from the Attorney General if the transaction poses no public risk and the cost of compliance outweighs the benefit of oversight.  This flexibility supports routine or low-risk asset transfers while maintaining accountability and transparency.

The regulation reinforces fiduciary responsibility and protects public interest by enabling proactive intervention before potentially harmful transactions occur.

8.  Implications of Code 9633 for Lenders:

• Due Diligence Requirement: Lenders must verify whether the borrower is a charitable corporation and whether the proposed transaction meets the 75% threshold.   Failure to comply with § 9633 may result in regulatory intervention or reversal of the transaction.

• Attorney General Oversight: The Attorney General has the authority to review and potentially object to the transaction if it is deemed contrary to the public interest or fiduciary obligations of the charitable entity.

• Waiver Option: A waiver may be granted if the transaction poses no risk to charitable assets and the cost of compliance outweighs the public benefit.

• However, lenders should not assume waiver approval and must confirm it in writing.

• Title and Escrow Considerations: Title insurers and escrow officers should be informed of the § 9633 requirement to ensure proper documentation and prevent delays or invalid conveyances.

• Risk Mitigation: Lenders should incorporate representations and warranties in loan documents that confirm compliance with § 9633 and may require evidence of Attorney General notice or waiver as a condition precedent to funding.

8.  Representations and Warranties Clause

Compliance with Corporations Code § 9633

Borrower represents and warrants that it has complied with all applicable requirements of California Corporations Code § 9633 in connection with the sale, lease, transfer, or encumbrance of substantially all of its assets, including the property securing this loan.

Borrower further represents that it has either:

(a) provided written notice to the California Attorney General at least twenty (20) days before the transaction, or
(b) obtained a written waiver from the Attorney General exempting the transaction from the notice requirement.

9.  Conditions Precedent to Closing Clause

Attorney General Clearance

As a condition precedent to the disbursement of loan proceeds, the borrower shall deliver to the lender either:

(a) a copy of the written notice submitted to the California Attorney General pursuant to Corporations Code § 9633, along with proof of delivery and expiration of the 20-day notice period without objection, or
(b) a written waiver issued by the Attorney General confirming that the transaction is exempt from the notice requirement.

10.  Covenants Clause

Ongoing Compliance with Asset Disposition Laws

Borrower covenants that it shall not sell, lease, transfer, or otherwise dispose of all or substantially all of its assets without first complying with the notice and/or waiver requirements of California Corporations Code § 9633. Borrower shall provide lender with prompt written notice of any such proposed transaction and furnish all documentation evidencing compliance.

11.  Default Clause

Event of Default – Noncompliance with § 9633

Any failure by the borrower to comply with the requirements of California Corporations Code § 9633 in connection with the disposition of substantially all assets shall constitute an Event of Default under this Loan Agreement, entitling the lender to exercise all remedies available under applicable law and this Agreement.

12.  Acceleration of Debt

Upon default, the lender may declare the entire unpaid principal balance, accrued interest, and any other amounts due under the loan agreement immediately due and payable.  This is a standard remedy that allows the lender to take swift action to protect its collateral.

Clause Example:
“Upon the occurrence of an Event of Default, including noncompliance with Corporations Code § 9633, Lender may, at its sole discretion, declare the entire outstanding Loan balance immediately due and payable.”

13.  Foreclosure on Collateral

If the loan is secured by real property, the lender may initiate judicial or nonjudicial foreclosure proceedings under California law.  This remedy allows the lender to recover its investment by selling the property at auction.

Key Consideration:
If the asset transfer violates § 9633, the transaction may be subject to legal challenge, potentially clouding title or delaying foreclosure proceedings.

14.  Injunctive Relief

Lenders may seek injunctive relief to prevent borrowers from proceeding with noncompliant asset dispositions.  This is especially relevant if the transaction is imminent and poses a threat to the lender’s security interest.

Clause Example:
“Lender shall be entitled to seek injunctive relief to prevent any transfer of assets in violation of Corporations Code § 9633 that may impair its collateral or security interest.”

15.  Specific Performance

In cases where monetary damages are insufficient, lenders may pursue specific performance, compelling the borrower to comply with statutory obligations, such as providing notice to the Attorney General or obtaining a waiver.

16.  Damages and Reimbursement

Lenders may recover actual damages, including legal fees, costs incurred due to delays, and any diminution in collateral value resulting from the borrower’s failure to comply with § 9633.

Clause Example:
“Borrower shall indemnify and hold Lender harmless from any loss, cost, or expense (including attorneys’ fees) arising from Borrower’s failure to comply with Corporations Code § 9633.”

17.  Appointment of Receiver

In some instances, particularly when the property generates income, lenders may petition the court to appoint a receiver to manage the property and preserve its value during litigation or foreclosure proceedings.

 18.  Due Diligence Is Still Critical

While approval isn’t needed, lenders must conduct thorough due diligence to ensure the safety and security of their lending decisions.

• Verify the non-profit’s legal status with the Registry of Charitable Trusts.
• Confirm the organization is in good standing with the IRS and the California Secretary of State.
• Ensure the property is not held in a charitable trust with restrictions that could complicate foreclosure or asset disposition later 

 19.  Religious Organizations

• It’s essential to note that churches and religious non-profits are generally exempt from certain registration and reporting requirements, providing a comprehensive understanding of the regulatory landscape.
• However, if they hold charitable assets or engage in fundraising, they may still fall under the Attorney General’s jurisdiction in specific contexts 

 20.  Lender’s Takeaway

• You can lend it to non-profits and churches without Attorney General approval.
• But you should conduct thorough due diligence to avoid complications related to charitable asset restrictions, governance issues, or regulatory noncompliance.  Failure to do so could result in legal disputes, financial losses, or damage to your institution’s reputation.

21.  Foreclosure Does Not Require Attorney General Approval, But Consult With Your Attorney.

• Foreclosure by a secured lender (e.g., a bank or private lender) on real property owned by a non-profit or religious organization does not require prior approval from the Attorney General.
• The Attorney General’s oversight generally applies to voluntary transactions initiated by the non-profit itself—such as asset sales, mergers, dissolutions, or insider dealings, not involuntary actions like foreclosure 

 22.  Charitable Asset Protection Considerations

While approval isn’t required, the Attorney General may become involved after the fact if:

• The foreclosure involves mismanagement or diversion of charitable assets.
• The non-profits failed to disclose or protect charitable property adequately.
• There is evidence of self-dealing or conflicts of interest that led to financial distress 

 23.  Due Diligence Checklist for Lending to Non-profits and Churches

·        Legal Status & Corporate Standing

• ☐ Verify entity type (e.g., 501(c)(3), religious corporation, public benefit nonprofit).
• ☐ Confirm registration with the California Secretary of State.
• ☐ Check status with the IRS (e.g., tax-exempt determination letter).
• ☐ Confirm registration with the Registry of Charitable Trusts (if applicable).

·        Governance & Authority

• ☐ Review bylaws and articles of incorporation.
• ☐ Confirm board approval for borrowing and encumbering property.
• ☐ Ensure authorized signatories are adequately documented.

·        Property Ownership & Title

• ☐ Verify legal ownership of the property.
• ☐ Check for restrictions or conditions tied to charitable use or donated assets.
• ☐ Confirm that the property is not held in a charitable trust with limitations on sale or encumbrance.

·        Financial Health

• ☐ Review recent financial statements and IRS Form 990 filings.
• ☐ Assess revenue sources (donations, grants, earned income).
• ☐ Evaluate debt levels and repayment capacity.

·        Regulatory Compliance

• ☐ Confirm compliance with Attorney General reporting requirements.
• ☐ Check for any past or pending investigations or enforcement actions.
• ☐ Ensure fundraising activities are properly registered (if applicable).

·        Loan Structure & Risk Mitigation

• ☐ Structure loan terms to reflect non-profit risk profile.
• ☐ Consider requiring personal guarantees or additional collateral.
• ☐ Include covenants related to financial reporting and use of proceeds.

·        Foreclosure Considerations- Restated

• ☐ Understand that foreclosure does not require Attorney General approval but may attract scrutiny if charitable assets are involved.
• ☐ Prepare for potential reputational or community impact

24.  Initial Registration and Annual Reporting: Responsibility of the Non-profit or church.

All charitable organizations, including religious non-profits that solicit funds, are required to register with the Registry of Charitable Trusts and file annual financial disclosure reports.  This includes:

• From CT-1 for initial registration.
• Form RRF-1 and either Form CT-TR-1 or IRS Form 990 for annual renewals 

25.  Transactions Requiring Notice or Approval

Specific significant actions by non-profit public benefit corporations require notice or approval from the Attorney General:

• Voluntary dissolution of the non-profit.
• Sales or disposal of all or substantially all assets.
• Merger with another entity.
• Conversion to a mutual benefit or business corporation.
• Self-dealing transactions.
• Loans to directors or officers.
• Sales or transfer of non-profit health facilities 

These requirements are designed to protect charitable assets and ensure they are used for their intended purposes.

26.  Oversight of Fundraising Activities

The Attorney General regulates:

• Professional fundraisers who solicit on behalf of charities.
• Raffle programs are conducted for charitable purposes (which require separate registration and reporting).
• Commercial Coventurers and fundraising councils 

27.  Religious Organizations

While religious organizations are generally exempt from some registration requirements, they may still be subject to oversight if they:

• Operate charitable trusts.
• Engage in fundraising activities that qualify as charitable solicitations.
• Participate in transactions involving charitable assets. 

28.  Probate and Charitable Gifts

The Attorney General must be notified of probate matters involving:

• Charity gifts.
• Assets held in a charitable trust.
• Disposition of assets to unnamed philanthropic beneficiaries.
• Property that may escheat to the state 

29.  Review : Key Approval Areas

           Formation & Registration

·        Initial registration with the Registry of Charitable Trusts.

·        Annual reporting of financials and activities.

    Asset Transactions

·        Sales, transfer, or disposal of all or substantially all assets.

·        Merger or conversion to another corporate form.

·        Dissolution of the organization.

    Governance & Compliance

·        Approval or review of self-dealing transactions.

·        Oversight of loans to directors or officers.

·        Monitoring conflicts of interest.

    Fundraising Activities

·        Regulation of professional fundraisers and commercial coventurers.

·        Approval of raffles and other charitable gaming.

    Charitable Trust Oversight

·        Supervision of charitable trusts, including those operated by religious organizations.

·        Review of probate matters involving charitable gifts or bequests.

    Healthcare & Facility Transfers

·        Approval required for the sale or transfer of non-profit health facilities.

30.     Where are the California Attorney General’s offices located?

·        Sacramento

·        Los Angeles

·        San Francisco

·        San Diego

·        Oakland

·        Fresno.