Nonprofit Law Jargon Buster – Voting Members vs. Self-Perpetuating Boards

When forming a nonprofit corporation, it is important to decide whether the corporation will be board driven or member driven. If the corporation is board driven, there are typically no members or the members have very limited rights. If the organization is member driven, the members are typically voting members who have the power to elect and remove members of the board of directors.

Voting memberships are useful when an organization wishes to be democratically controlled by its constituents. Voting memberships structures are commonly used by member driven organizations such as social clubs, churches, chambers of commerce and trade associations. In such cases, the organization exists to serve its members and its makes sense for control to be vested in the members.

When considering whether to include voting members in a nonprofit corporation, it is important to understand that voting members of a nonprofit corporation are generally analogous to shareholders of a business corporation. Voting members have statutory rights under state law; therefore, it is important to clarify the right of members to avoid inadvertently creating a voting membership class and vesting ultimate control in the members when that is not your intention. Once a membership has been established, it may be difficult to eliminate, and it may be impossible without the consent of the members.

Voting memberships can also complicate the governance of a nonprofit corporation. For example, voting membership corporations must keep up with noticing and documenting meetings of the members in addition to board of director meetings. The membership roster must be kept up to date to know who is eligible to vote.

Voting membership corporations can also be fickle. If the requirements for membership are set too low, it is possible for factions within the membership to sign their supporters up as members and shift the direction of the nonprofit corporation. One such case includes the well publicized struggles at the Sierra Club. In the Sierra Club dispute, a faction developed that supported an anti-immigration agenda offensive to many of the Sierra Club’s longtime supporters and allies. The anti-immigrant faction encouraged its supporters to send in their $25 dues payment so that they could gain the right to vote at the annual meeting. In the end, the incumbents were successful in fending off the takeover attack. The Sierra Club case was unusually high profile; however, similar scenarios regularly play out in nonprofit boardrooms across the country.

In contrast to corporations with boards elected by voting members, most charities are governed by self-perpetuating boards. Self-perpetuating boards simply vote for their own replacements. In a nonprofit with a self-perpetuating board, the Board of Directors is typically the ultimate seat of authority within the organization.

It is also possible to combine a self-perpetuating board with nonvoting members. Nonvoting members may be required to pay dues and receive certain program benefits. For example, many museums sell memberships that permit a member to gain free admission annual admission to exhibits and to receive certain other benefits such as gift shop discounts, exhibit previews and invitations to special events. However, such memberships do not typically include voting rights or any special privileges related to governance of the organization. Non-voting memberships are useful in some organizations but founders must take extra care to define and limit the rights of non-voting members as where governing documents are ambiguous or unclear, state law will fill in the blanks and may grant unintended rights to members.

Ellis Carter is a nonprofit lawyer licensed to practice in Washington and Arizona. Ellis advises tax-exempt clients on federal tax matters nationwide.

21 Responses to Nonprofit Law Jargon Buster – Voting Members vs. Self-Perpetuating Boards

  1. We have Articles of Incorporation and bylaws defining us as a member corporation. How do we change those to a non-member corporation, ruled by an independent board?

    Can you recommend sample bylaws and reading for us? Thank you.

  2. State law may require the members to approve these changes so you should first check your state laws governing nonprofit corporations. I don’t recommend pulling sample bylaws off the internet. There a many many variables could impact your organization including state law, tax status, current practices within your organization, etc. that make it unique. You don’t want to risk committing malpractice on yourself by adopting a document that does not work for your organization.

  3. This is very useful for a lake association amending 15 yr old by-laws. In forming another non-profit years ago, I was advised by an atty that the self-perpetuating form of governance caused more scrutiny by the government b/c it was (for lack of a better description) “less democratic”. Does anyone know if this is true?

  4. Self-perpetuating boards are the most common among nonprofits; however, HOAs and similar associations whose membership is based on ownership of a specific piece of property are structured as membership organizations to permit each owner to have a say.

  5. Would a membership organization with classes of members have the Directors elect its officers and the members elect the Directors?

  6. I find your article very helpful. However, I do have the following question: Can the bylaws of a membership based nonprofit specifically say that members have no voting rights?

  7. Absolutely. If that is your intention you should clearly state that the members do not have voting rights. We go one step further and typically state that they are not “members” as members are defined under the state nonprofit statute. We often even choose to call them “friends” or “affiliates” to avoid any confusion.

  8. Our nonprofit uses written ballots. There is confusion over the statutory language that says a written ballot must set forth each proposed action with an opportunity to vote yes or no. Some feel each stand alone matter (bylaw amendments e.g.)must be presented individually and others feel all proposed actions (several bylaw amendments e.g.) can be lumped under one question. Any thoughts?

  9. I attend a church that is reg in Oregon as a non-prof with voting members. The “pastor” recently appointed three elders (board members and shepherds in the bylaws) without presenting them to the congregation to be voted on. The church has kept a membership roll in the past, but within the last two years has stopped with annual member meetings and allowing the members to vote on anything. When I questioned one of the newly appointed elders, he said they were going to be amending the bylaws. This can only be done by a vote of the members, as stated in the bylaws. What should we do?

  10. Can a membership organization that gives voting rights to due paying members write their bylaws that limit the voting rights of other paying members such as minors under 18 yrs old?

  11. State law controls the rights of voting members. If its a matter of defining membership classes when the organization is formed, the organization has great flexibility to determine qualifications for membership. If the organization is redefining members’ rights after they have been granted, state law typically requires the members to vote and approve of the change.

  12. Ellis, you keep mentioning state law, but you have international readers. You may want to remind people to check laws in whatever jurisdiction they are in. There is no longer any way for federally incorporated not-for-profits in Canada to take away all voting rights from non-voting members. A bylaw that tried to do that would be invalid. Similar law is pending in Ontario for provincially incorporated not-for-profits.

  13. Thanks Jane that is good to know. We are licensed in the US but we do maintain a list of English speaking nonprofit/charity law counsel in other jurisdictions around the US and around the world if anyone would like a referral.

  14. I’m deeply concerned to have my favotite membership nonprofit memberdriven. The articles and bylaws seem to support that view, but the state (Oregon) nonprofit statute miros language from the Model nonprofit corporation act os the 1980’s is saying:
    “A person that does not retain a right to vote on more than one occasion to elect a director or directors is not a member.”

    The Bylaws provide member voting at special meetings and aso for the exclusive purose of adopting bylaws. Is it clear that where membership and voting for directors at the annual meeting depend on paying an annual fee does the phrase “retain a right to vote” point to anything more than paying dues?

  15. Very helpful article. We have a non-profit (a performing arts organization) that explicitly states that the corporation has no members. However, we do have “voting participants.” It’s not explicitly stated in the by-laws what these voting participants can actually vote on, but in our practice, they elect board members and officers every two years. Have you seen any structure like this before? Thanks.

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