Court Concluded that a State Law Giving Members of Nonprofit Corporations the legal right to Inspect Corporate Records Could Not be Applied to the Church

Do members of an incorporated church have the legal authority to inspect the church's financial

Do members of an incorporated church have the legal authority to inspect the church's financial records over the objection of church "elders"?

That was the difficult issue before the Arkansas Supreme Court in a recent case. As part of what the court described as a dispute of "a longstanding, ongoing, and heated nature, certain members of a local Church of Christ congregation sought to obtain various financial records of the church as part of a concerted effort to oust the current church leadership.

When church elders rejected the members' request, the members proceeded to incorporate the church under a state nonprofit corporation law making the "books and records" of a corporation subject to inspection "by any member for any proper purpose at any reasonable time." Church elders continued to reject the members' request for inspection, whereupon the members asked a state court to recognize their legal right to inspection under state corporation law.

The elders countered by arguing that application of state corporation law would impermissibly interfere with the religious doctrine and practice of the church, contrary to the constitutional guaranty of religious freedom. Specifically, the elders argued that according to the church's "established doctrine," the New Testament "places within the hands of a select group of elders the sole responsibility for overseeing the affairs of the church," and that this authority is "evidenced by biblical admonitions to the flock to obey and submit to them that have rule over the flock."

The state supreme court agreed that "application of our state corporation law would almost certainly impinge upon the doctrine of the church" as described by the elders, and accordingly would violate the constitutional guaranty of religious freedom. The court relied in part on a 1952 decision of the United States Supreme Court in which the Court ruled that religious freedom includes the right of religious bodies "to decide for themselves, free from state interference, matters of church government as well as those of faith and doctrine."

The court concluded that if the application of a state law would conflict with the "doctrine, polity, or practice" of a church, then the law cannot be applied to the church without a showing of a "compelling state interest." No such showing was made in this case, the court concluded, and therefore the state law giving members of nonprofit corporations the legal right to inspect corporate records could not be applied to the church.

This decision should not be interpreted as giving the leaders of incorporated churches broad discretion in denying members' requests for inspection of church records. Note that the court based its ruling entirely upon its finding that the church's doctrine and practice required members to submit without reservation to the authority of elders in all matters of church administration. Obviously, this is a position that does not enjoy universal acceptance. Gipson v. Brown, 749 S.W.2d 297 (Ark. 1988).

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