Too often, nonprofits include provisions in their bylaws that are old-fashioned, unnecessary, redundant, or that complicate rather than streamline governance. Examples include the following:
- Information that Will Change Frequently. The Bylaws should reflect the fundamental rules governing the nonprofit that are not likely to change frequently. Staff job descriptions, detailed committee charters, rules for conducting the annual meeting, guidelines for fundraisers, etc. are better suited for board resolutions or the nonprofit’s policies and procedures manual. In this manner, the board can avoid constantly amending the bylaws when a simple resolution will suffice.
- Processes and Procedures that are Ignored in Practice. Many ambitious boards impose numerous procedures with strict deadlines in the Bylaws. Examples include specific deadlines for meetings, notices, reports, committee action, etc. If the Board is not going to carefully adhere to these procedures and deadlines, it is far better to omit them. If the processes and procedures called for in the Bylaws are not followed, those who disagree with Board action will always find a way to challenge the board’s decisions based on a technicality.
- Detailed provisions Outlining the Nonprofit’s Purposes and Activities. I see a lot of bylaws with extensive purpose clauses that become obsolete over time. When this happens, the bylaws have to be amended to reflect the organization’s current activities. Rather than risk a conflict between the articles of incorporation, the bylaws and the organization’s actual activities, stick to a broad charitable purpose clause that will permit the organization’s activities to evolve over time.
- Ambiguous Member Provisions. Voting members of a nonprofit corporation are analogous to shareholders. While they do not have ownership rights, they usually have rights to select board members and approve key decisions. Many state nonprofit corporation statutes will grant “members” certain rights unless the Bylaws expressly limit their powers. Some state statutes even grant rights to voting members that cannot be overridden by the Articles and Bylaws. Once voting members have been created, their consent is usually required to reduce their rights so references to “members” should be made with extreme care.
- Requirements to follow Roberts Rules of Order. It is common for non-profits to incorporate Roberts Rules by reference into their governing documents. Roberts rules can serve as a useful guideline for large boards; however, many people do not realize that Roberts Rules of Order requires much, much more than just a motion and a second. It is a comprehensive body of work and unless you fully understand and apply Roberts Rules in its entirety, the Board opens the door to those who would challenge their actions on a technicality. When a dispute develops, the failure for a Board that has incorporated Roberts Rules into their Bylaws to fully follow Roberts Rules leaves their actions open to challenge. The better practice is to reference Roberts Rules as a guideline rather than a requirement or better still, leave it out all together.
- Complicated Due Process Provisions for Removing Directors, Officers or Members. If a majority of the Board of Directors have determined that an individual needs to be removed, due process provisions only draw out the process and create legal hurdles the individual can use against the nonprofit. This may make sense for an organization where expulsion could lead to economic consequences such as a professional society. Otherwise, it is in the nonprofit’s best interest to have the ability to remove the problematic individual without cause.
- Statements Requiring the Nonprofit to Comply with the Law. This one always makes me laugh. So, without the provision, the Board would feel empowered to break the law? Its redundant and increases the amount of unnecessary verbiage. Leave it out.
Once the key terms related to a nonprofit corporation’s governance structure, control provisions, director’s terms, officers, and voting procedures and clearly articulated and the redundant, overly complex, and frequently changing items are removed, the Board should be left with a workable document to guide its deliberations. If you missed it, read part I about what to include here.
Ellis Carter is a nonprofit lawyer licensed to practice in Washington and Arizona. Ellis advises tax-exempt clients on federal tax matters nationwide. For an estimate on drafting or revising bylaws, contact firstname.lastname@example.org.