Drafting Nonprofit Bylaws

You must be careful while drafting nonprofit bylaws. Boards and committees often take months to draft an appropriate set of bylaws. Sometimes board members find the bylaws of other organizations available on the internet and use them as a template. However, they forget to check whether the said bylaws are suitable for their organizational setup or whether they meet the requirements of federal and state laws.

It's always advisable to begin with the right template and customize it for your organization with the help of an experienced attorney right from the start. Different attorneys use different styles for drafting nonprofit bylaws. Some attorneys prefer to include rules for almost every possible situation to provide complete operational guidelines. Others try to keep it simple and include only important legal requirements.

Since every state has its own corporate law, the details you should include in nonprofit bylaws also vary with the state. However, the essential elements almost always remain the same.

Governance Structure

A nonprofit organization can be under management either by the board or by its members. In case of a board-managed organization, there are usually no members. Even if there are, their rights are highly limited. In a member-managed organization, the members usually have voting rights, and they can elect or remove the directors. State law grants certain rights to voting members.

Therefore, you should clarify members' rights in the bylaws, so you don't end up vesting control to the members inadvertently when you actually intend to set up a board-managed structure.

Provisions for Controlling the Organization

Once you determine whether the controlling power of the nonprofit corporation will vest in the board of directors or the members, you should consider the following factors:

  • Many states allow a nonprofit corporation to have directors and members appointed by a third party or who hold office by virtue of their position in some other organization.
  • You can use super-majority votes and reserved powers to strike a balance between competing groups. For instance, you can have reserved powers for certain actions such as removing or replacing a director, so it would require the approval of certain members or delegates.
  • Super-majority votes refer to the requirement of having a certain percentage of votes higher than the majority (for example, 75 percent) for certain actions.

Director's Terms

You should clarify the terms of office for directors. Directors can hold:

  • A successive term where the terms of all the directors come to an end simultaneously.
  • A staggered term where directors' terms end in groups at different times. Staggered terms offer the benefit of continuity in the functioning of the board.

You may also specify ex-officio directors, whose position is tied to their holding office in some other organization. They do not hold office in terms. For example, if the president is the ex-officio member of the board, then whoever becomes the president automatically becomes a board member by virtue of his or her office. Ex-officio board members may or may not have voting rights.

You should also specify the procedure for the removal and the replacement of directors.

Officers

  • The bylaws should clarify the procedure for the appointment, the removal, and the replacement of officers and what their duties and terms would be.
  • Most of the state laws require a nonprofit corporation to have a president, a treasurer, and a secretary. In many states, you can also designate other officers in the bylaws.
  • You should also clarify whether only directors can be appointed as officers or any staff member can serve as an officer.

Voting Procedures

The section on voting procedures should include the following information:

  • Quorum or the minimum number of directors required to be present to hold a meeting.
  • Minimum number of votes required to pass a resolution.
  • Notice requirements such as the minimum notice period required to hold a meeting and the valid modes of serving a notice.
  • Voting rules for members and directors.

Committees

  • Instead of having provisions for ad hoc committees, it's better to provide procedures for creation and abolition of committees.
  • The bylaws should be clear about the type of authority that can be delegated to committees and the authority that the board must retain.
  • You may also want to have a provision for advisory committees.

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