It is common for non-profits to be lax about their corporate and tax compliance requirements, as well as other regulations that are specific to their mission statement. But one of the most common mistakes of non-profit boards is to forget to follow their bylaws. The bylaws are a series of rules contained in one document that are used to start the non-profit and to guide its board. They are often put away in a drawer and forgotten about soon after the non-profit is founded. What many boards don’t realize is that the individual directors may be personally liable for the actions of the non-profit, and that in order to be protected, among other things, the board must follow the rules outlined in the bylaws. I understand why boards forget to follow their bylaws, as non-profit staff are usually a busy and hard working bunch and the board of directors often volunteer many hours to help keep their non-profit funded and operational.
But keep this in mind- in addition to putting directors’ minds at ease by doing what is required by law, the bylaws can be a fantastic quick reference to keep the board of directors on track with their requirements as non-profit corporations. Also, when a change needs to be made to the way the non-profit board makes decisions, an amendment to the bylaws (a written document reflecting the approved changes of the board) is the correct way to make this change. Here are three quick tips to using bylaws with your non-profit:
- Be sure a copy of the bylaws is kept in a binder (often called a “corporate binder” or “minute book”) along with all of the other documents used to found the organization (such as the IRS application for tax-exempt status). The minutes of the meetings of the board of directors should be kept in the binder as well.
- Make sure that the Secretary of the Board brings a copy of the bylaws to each board meeting and that the rules governing notice of meetings, meeting attendance rules, and policy decision rules are followed.
- When the Board wants to update the Bylaws to allow for changes, such as a conflict of interest policy, be sure the Bylaws Amendment process are understood and followed.
As a final note, in my practice I have come across non-profits who have been operating without bylaws. When that is the case, I urge the non-profit to draft and adopt bylaws as quickly as possible or to hire an attorney to do so. I have had the pleasure to work with and for many non-profits spanning nearly twenty years. Learn more about my non-profit services by visiting my Non-Profit Lawpage. Please feel free to contact us to learn more about what my law office can do to assist your non-profit.