What happens when bylaws are mentioned in a board meeting? Dread and confusion? Recoil and retreat?
When bylaws are mentioned, it usually means one of two things: that a conflict has risen to the point where the bylaws must be consulted, or that someone is pointing out an area of noncompliance that has gone unnoticed for years. Take time in the first quarter of 2022 to review bylaws, propose adjustments and finalize revisions.
Regulations about nonprofit bylaws are done individually by state, so there is quite a bit of variation. (This means you can’t just “copy and paste” another nonprofit’s bylaws!) It’s important to obtain the applicable state laws and make sure that the bylaws are in compliance. In addition, some cities have further regulations for nonprofits. Did you know that some states and cities have different rules for nonprofit organizations for which the board automatically includes an elected official or government employee as a result of that individual’s election or employment?
Pro Tip: Consult your city or state’s requirements, and mark your calendar to check for updates annually.
Three guiding principles for nonprofit bylaws:
1. Don’t put items in the bylaws that should be flexible. Here’s a great example: if you specify a board committee in the bylaws, and there hasn’t been such a committee in a few years, someone could claim that you are in violation of your own bylaws. Or, if the bylaws state that meetings will be held on the third Wednesday of each month, you can’t change to Thursdays without a change in the bylaws.
2. Bylaws are for the disruption of eruptions. Remember that if trouble erupts — such as internal conflict or attacks from others — the bylaws will become very important. With the fluidity and changes occurring in this sector, I recommend the Governance Committee review the bylaws on an annual basis. Because board officer terms can make it hard for the board to keep track of bylaw revisions, have this duty included as a responsibility of the Executive Director.
3. Revision tracking. Immediately attach (by staple if necessary) any changes made to the bylaws to the copy kept by the Executive Director. Too often everyone forgets about changes to the bylaws, when it happened, what it used to be and why. A living history of bylaws will give you insight every time you review and consider a change.
Use my checklist to ensure the most important provisions are included in your bylaws:
- Indemnification. A statement that limits the personal liability of board members.
- Members. Whether the organization has members (such as members of a neighborhood or professional association) and, if so, what their rights are. In a true membership organization, members have the right to elect officers. Even if you don’t have members with legally enforceable membership rights such as voting rights, you can still have people called “members,” but the distinction should be clarified in the bylaws.
- State variations. Remember, this varies by state. (See Pro Tip above.) Check with your Secretary of State for “membership” requirements, and communicate accordingly.
- Number of board members. Example: minimum of five and a maximum of fifteen board members. Some states specify a minimum, and some specify a formula for a minimum and maximum, so check your state’s law.
- Quorum. A quorum is the minimum number of board members who must be present for official decisions to be made. If an organization currently has fifteen members, and the bylaws state that one-third of the members constitutes a quorum, then official decisions can only be made at board meetings where five or more members are present. Many states specify the minimum required for a quorum. Check your state’s law.
- Terms and term limits. Example: two years, with term limits of three consecutive terms (making a total of six years); after a year off, a board member may be permitted to return. Similarly, terms can be staggered so that, for instance, one-third of the board is up for reelection each year.
- Officer details: Titles of officers, how the officers are appointed, and their terms. Example: The Treasurer is appointed by majority vote at a regular meeting of the board; an officer term is for one year with a maximum of two consecutive officer terms.
- Board Member Removal. Procedure for removing a board member or officer. Example: by majority vote at a regularly scheduled meeting where the item was placed on the written agenda distributed at least two weeks ahead.
- Conflict of interest policy. Many bylaws simply state that there will be a conflict of interest policy but keep its exact wording out of the bylaws. Create and file the conflict of interest policy separately.
- Meetings. Specify minimum number of board meetings per year. For example: four, with one in each quarter.
- Noticing meetings. Outline how a special or emergency board meeting may be called and noticed.
- Committees. Provide instruction on how a committee may be created or dissolved. My recommendation is to not specify committees in the bylaws at all. Instead, permit the board to create and dissolve standing and temporary committees as it sees fit. As a result, the bylaws need not be changed each time a committee is created or changed.
- Conference calls and electronic meetings. Have you added sections to the bylaws that describe how to hold a board meeting online, or whether and how decisions can be made by email?
Pro Tip: Check with your secretary of state to see if online meetings are legal or what is allowed temporarily during the COVID-19 pandemic.
- Changes. Specify the procedure for changing the bylaws. Example: by majority vote at a regularly scheduled board meeting.
After the bylaw review and/or revision, what’s next?
Each board member should be given a copy of the articles of incorporation, the IRS and state determination letters, and the bylaws. Some organizations also post their bylaws on a password-protected section of their website. (Contrary to popular belief, your bylaws do not need to be made available to the public.)
So…what if I DON’T review my bylaws?
You know how you forget to floss between dentist appointments and you end up in the chair WAY longer than you want to be or worse, have to come back for a drill and fill?
Reviewing your bylaws is like flossing. It’s not always our favorite thing to do, but it prevents uncomfortable situations later. Appropriate adjustments to the bylaws should be recorded in the board minutes, added to copies of the bylaws, and, in some cases, reviewed by an attorney experienced in nonprofit law.
Consider this: An individual is invited to join your board without much scrutiny and are later found to be disruptive and destructive. Too often the board looks to the bylaws to see how to remove such a person, only to discover that the bylaws were written twenty years ago (and seldom looked at since) and have no such provision.
Wouldn’t it have been easier to floss?