By Suzanne Lanctot
The bylaws of a nonprofit are generally viewed as the second most important document only after the Articles of Incorporation. Bylaws provide an outline of the governance structure of the organization. Sadly, and for many reasons, this document is far too often outdated (maybe antiquated) and not reflecting the current practices of the organization. Organizations evolve and gradually, under the radar, the bylaws are no longer serving its needs. One important method for dealing with this inevitable evolution is to use/amend more flexibility into the language and structure of the document so that the organization can more readily adapt to impending future changes.
It is a good idea to review the document every few years and keep record of any revisions as they occur. A reputable Administrative or Association Management Company with a recognized expert, such as a Certified Association Executive (CAE), can provide the experience working in this area.
Although it is not a requirement for bylaws to be made public, consider doing so for greater transparency and board accountability.
About the State
Regulations are done by the state so the best place to start a review is with a solid understanding of the Nonprofit Corporation Statute. Keep in mind, where your bylaws are silent there are default rules within these statutes. Therefore it is best to identify where they may exist in the document…and address them with more specific provisions.
Look at the “purpose clause” in your Articles of Incorporation. This clause describes the reasons for operation and has a direct bearing on the tax exempt status that was granted. Is it the same language in your bylaws? And does it still reflect your current organizations purpose?
Look at the “dissolution clause.” This directs what the nonprofit will do with its assets if it dissolves or merges. Is it in line with current values?
The following are some of the most important provisions and questions that need to be answered for a thorough review: don’t wait for a particular circumstance. Have these answers outlined, readily accessible, and updated every 2 years as needed.
- Have the bylaws changed, and if so, was this reported to the IRS? A 501c3 should report such changes to the IRS with the next (990) report. Additionally, does the state in which the nonprofit is incorporated require to report changes?
- Are there requirements to be a board member, such as residency? What are the disqualifications?
- What are the titles of the offices? Roles?
- How are they elected or appointed?
- What are the terms and term limits?
- Are officers/ directors indemnified form personal liability?
- What is the size of the board and what are the minimum and maximum numbers of board members? Is this number is too small or too large?
- Is there a required number of board meetings per year? And are there attendance requirements?
- What are the rules/procedures for conducting meetings? What is the number for a quorum for official decisions?
- Is the conflict of interest policy clearly defined? And what are the compensation and reimbursement rules?
- What is the procedure for removing a board member or officer?
- How are committees formed? Who can serve? Appointed? How terminated?
- Conference calls/electronic meetings? How is voting regulated?
- How do you call an executive session and what can be discussed? – rules vary by state.
- What is the process and provisions to amend the bylaws? Is there a bylaws committee to review and amend? Should it be ongoing? Is the process too easy or too hard? Who can propose changes and how are they proposed?
- How will monies be distributed?
- Is there a membership provision/requirements? Can membership be revoked and what is the procedure for doing so?
- Are there diversity requirements? If not, consider invoking them.
Remember, your bylaws must serve your organization, so review and examine them, ask these questions, and make the necessary changes to help facilitate its growth and evolution.