Judges: WINSTON BRYANT, Attorney General
Filed Date: 10/24/1991
Status: Precedential
Modified Date: 7/5/2016
The Honorable Larry Mitchell State Representative P.O. Box 81 Bryant, AR 72022-0081
Dear Representative Mitchell:
This is in response to your request for an opinion on several questions pertaining to the Woodland Hills Water Association ("Association"). Your questions will be restated and answered in the order posed.
1. Is the Woodland Hills Water Association a non-profit corporation?
The Circuit Court Order attached to your request indicates that the Association was formed as a non-profit corporation.1 It appears, therefore, that the answer to this question is "yes." It should be noted, however, that the particular facts and circumstances surrounding the operation of the Association may affect this determination.
2. Can the manager, who is also the registered agent, draw a salary?
It appears that the answer to this question is, generally, "yes." There is no statutory prohibition against the manager's receipt of a salary. It should also be noted that an Arkansas non-profit corporation may pay compensation to its members, directors or officers for services rendered. A.C.A. §
3. Can the manager run the Association without a Board of Directors?
The number of directors constituting the board of directors of a nonprofit corporation cannot be less than three. A.C.A. §
4. Can the Association require Water District #5 and Water District #6 to pay for any expenses for additional equipment and facilities if the existing facility becomes inadequate?
This question requires an interpretation of agreements entered between the parties. All of the particular facts and circumstances surrounding the agreements must be considered, in an effort to determine the parties' intent. These matters are not properly within the scope of an Attorney General Opinion. This office cannot address matters essentially involving the construction and application of contracts between private individuals and/or entities. I am precluded, under Act §
5. a) Can the Association's money be put into another company that is owned by the manager?
b) Should salaries for Association employees be paid out of this company account?
c) Should the manager use this company to construct a water tank at a cost of $80,000.00 using money loaned to the Association from one of his savings accounts?
These questions also involve a factual inquiry into the Association's operations, and the extent and nature of the manager's authority. The general manager of a corporation ordinarily has general charge, direction and control of the affairs of the corporation for the carrying on of which it was incorporated. 19 C.J.S. Corporations § 471 (1990); 18B Am.Jur.2d Corporations § 1540 (1985). His powers are similar to those of the officers of the corporation. Id. It has been stated that the manager's implied powers are ordinarily coextensive with the general scope of the business of the corporation. Id. As noted above, however, ultimate control rests with the board of directors. It should be noted that the manager's authority may derive from the bylaws, a resolution of the board of directors, or other written authorization. 18B Am.Jur.2d Corporations § 1523 (1985).
As a general matter, it is clear that directors, officers, and agents must promote the interests of the corporation to the exclusion of their own self-interest. 19 C.J.S. Corporations § 510 (1990). They are not, however, absolutely prohibited from dealing in all transactions in which the corporation may have an interest. Id. Rather, the misuse of the position is what is prohibited. Id. Any transaction between the manager and the corporation will be closely scrutinized. 19 C.J.S. Corporations
§ 507 (1991); see also generally Horne Brothers, Inc. v.Ray Lewis Corp.,
I lack sufficient information to determine which, if any, of the above principles apply in response to your questions. In any event, however, a factual determination is required. The foregoing will, however, hopefully offer quidance in addressing the matter.
6. As the Association is being run now, is it being run according to State law?
It should be initially noted that this office lacks the resources necessary in order to act as a factfinder in assessing the legality of all of the Association's operations. With regard generally to the arrangement reflected in the Special Master's report, however, I will note that the operation of a water association as a private supplier of water in Arkansas is not contrary to law. While the concerns set forth in the Master's report that was attached to your request perhaps merit consideration by the legislature, I am aware of no state law currently prohibiting the arrangement reflected therein.2
This particular arrangement has apparently been the subject of extensive review in the Saline County Chancery Court. See Saline County Chancery Court Case No. E-87-742. Pleadings recently filed in that case indicate that while a settlement agreement was reached, the court has been asked to make further determinations regarding the Association's operations. Any factual questions regarding the manner in which the Association is being run are appropriately addressed in that judicial forum.
The foregoing opinion, which I hereby approve, was prepared by Deputy Attorney General Elisabeth A. Walker.
Sincerely,
WINSTON BRYANT Attorney General
WB:cyh