When the Attorney General for the District of Columbia brings an action against a nonprofit corporation, the Superior Court is not limited to ordering the organization to stop. Under D.C. Code § 29–412.20 the court may dissolve the corporation, place it in receivership, or impose a constructive trust on compensation already paid to a director, officer or manager. The organization’s exposure is therefore institutional, not only reputational, and it begins before any suit is filed, because the same section gives the Attorney General subpoena power during the investigation that precedes one.
The short version
- The D.C. Attorney General can sue a nonprofit corporation on three statutory grounds, all in § 29–412.20(a)(1).
- The available relief includes receivership and a constructive trust on compensation already paid to a director or officer. Those remedies reach the organization and individual pay, not just future conduct.
- § 29–412.20(b)(1) allows the Attorney General to issue subpoenas while deciding whether to sue. The first document demand can arrive with no complaint on file.
- Directors are measured against § 29–406.30: good faith, and a reasonable belief that they are acting in the corporation’s best interests.
- Members and directors have their own route to the same remedies under § 29–412.20(a)(2), including where corporate assets are alleged to be misapplied or wasted.
On August 31, 2026 the Office of the Attorney General for the District of Columbia (“OAG”) announced a suit against a nonprofit founder and two related organizations, alleging misuse of District grant funds and breach of an earlier settlement that was intended to remove the founder’s control over the organizations’ money (OAG announcement). Those allegations are unproven. What the filing usefully illustrates is the statutory architecture behind any such action, which is what an organization in the District needs to understand well before it is the subject of one.
What can the court actually order?
A court can order more than most organizations expect. The remedies in § 29–412.20(a) are set out below.
| Relief available under § 29–412.20(a) | What it means in practice |
|---|---|
| Dissolve the nonprofit corporation | The organization ceases to exist as a legal entity. |
| Place the corporation in receivership | A court-appointed neutral takes control of assets and operations. See what a court-appointed receiver does. |
| Impose a constructive trust on compensation paid to a director, officer or manager | Reaches money already paid to an individual, not only future payments. |
| Other injunctive or equitable relief | Includes orders governing control of funds and governance going forward. |
Receivership is the remedy organizations tend to overlook. It converts a dispute about governance into a transfer of control. The parties to the action may submit recommendations as to who the receiver should be, but the judge makes the final decision. An unfavorable receiver can be very bad for one side or the other, so that selection process is itself worth contesting rather than conceding.
Two limits on that framing are worth stating plainly, because both are commonly assumed and neither is correct. Receivership is not a nonprofit remedy. It can be imposed on any legal entity, whether a closely held company, a partnership, a publicly traded corporation or a nonprofit. The nonprofit provisions discussed here are one route to it, not the only one. Nor is it a remedy only a regulator can seek. As set out below, members and directors have their own statutory route, and in ordinary commercial litigation a party can ask a court to appoint a receiver over a business without any regulator involved at all. See court-appointed receiverships for how the remedy works outside this context.
Can the Attorney General demand documents before filing suit?
Yes, the subpoena power runs before any suit is filed. Section 29–412.20(b)(1) provides that where the Attorney General, “in the course of an investigation to determine whether to bring a court action under this section,” has reason to believe a person holds relevant information or documentary material, the Attorney General may issue and serve a subpoena requiring testimony or production. The practical consequence is that the first contact an organization has with such a matter is often a document demand rather than a complaint, at a point when no allegation has been tested and the organization’s own record is still being assembled. The handling of that demand is a subpoena-response question before it is a litigation question.
What standard are the directors themselves measured against?
Under § 29–406.30, each director discharging the duties of a director must act “(1) In good faith; and (2) In a manner the director reasonably believes to be in the best interests of the nonprofit corporation.” The companion provision, § 29–406.31, sets the standard of liability and places the burden on the party asserting it. Read together, they explain why the record of what a board knew, when it knew it, and what it did next is usually the central evidence. That record is made, or not made, in the first days.
Is the Attorney General the only party who can seek these remedies?
No, and this is frequently missed. Section 29–412.20(a)(2) gives the same menu of relief to a proceeding brought by 50 members, or members holding at least 5% of the voting power, whichever is less, or by a director or a member of a designated body. The grounds there are broader: board deadlock causing irreparable injury, conduct by those in control that is “illegal, oppressive, or fraudulent,” corporate assets “being misapplied or wasted,” and a failure to elect successor directors across two consecutive annual meeting dates. A governance dispute inside an organization can therefore reach receivership without any regulator involved at all.
Why an internal investigation has to be independent to be worth commissioning
An investigation commissioned by the people whose conduct is in question answers nothing. Where allegations concern the control of funds by an officer or founder, the value of an independent investigation lies in who commissions it, how privilege is structured, and what is preserved. All of that is settled before the first interview, not after. Those choices determine whether the resulting report can be relied on by the board, and whether it can be shown to anyone else without waiving more than intended.
Questions organizations ask
Does a D.C. nonprofit have to be insolvent before a receiver can be appointed?
Does a constructive trust reach compensation that has already been paid?
Is a subpoena under § 29–412.20(b) a sign that a suit has been decided on?
Do these provisions apply to a trade association?
Who can be required to give testimony or produce records before any suit is filed?
When does a creditor’s route to these remedies open?
Where is a refusal to comply with a subpoena resolved?
How does a board preserve the protection it gets from relying on others?
How much personal exposure does a director face in a proceeding of this kind?
Sources
Waxman Litigation conducts independent investigations for boards and audit committees in the District of Columbia, and acts for organizations responding to government subpoenas and investigative demands.
The firm also serves as a court-appointed receiver. Inquiries: contact the firm.
