9.10.4: Authority of Non-Profits To Engage in Commercial Activities

Premium Content
This section of the Encyclopedia of Private Equity is premium content and only available to accounts which have a subscription. If you have an account that has access to this section, please login now.

Register For The Encyclopedia of Private Equity
Encyclopedia of Private Equity & Venture Capital (Monthly Recurring Subscription) Cost: $59.00
Single User - One Year of Complete Access (Best Value) Cost: $495.00

Abstract

The authority of a university or other tax-exempt institution to enter into commercial relationships has to be examined on a case-by-case basis. Many a university, particularly one publicly sponsored, has formed a "research institute" governed by a board of trustees appointed by the chairman of the university's governing board. Among the several reasons for organizing such a vehicle, not the least is to avoid issues concerning legal authority and independence-that is, to vest power over activities such as joint industry/university ventures in an entity which is not a creature of statute nor ancient grantor documents and is not subject to the oversight and governance of the public members of the board of regents. If no such entity exists, the issue of ultra vires should be taken seriously by any potential partner. A challenge to the legal authority of a tax-exempt institution to pursue commercial ventures is likely to be...