  1.
Our organization is now reviewing its
bylaws for the first time in fifteen years. I notice that we are supposed
to have members, but under the bylaws it is not clear what their role
is. In fact, for as long as I have been on the board, members have
not played any role at all. Have we violated the law in some way?
Do we have to have members? First,
a word of general advice to others in similar situations: As your
organization grows and changes, it is important to make sure that
your bylaws accurately reflect the manner in which the organization
operates. If you can not show that an action taken by the organization
was duly authorized pursuant to the rules (bylaws) that the organization
has established for itself, then lenders, creditors, litigants,
or any other third parties who you deal with may dispute, or at
least hesitate to accept, such action.
As to the concept of "members",
the term itself is the source of endless confusion for members of
nonprofit organizations, board members, members of the public, and
members of the legal profession. Essentially, the term is used in
two ways. First, it describes what may be referred to as corporate
members: those individuals who have some legal rights in the organization,
usually the right to elect or approve a slate to the board of directors,
and approve of major corporate changes.
The other type of member is simply one who
in return for a membership fee or other donation receives a benefit
of some kind, usually a newsletter, use of the organization's facility,
or preferred seating or admission. This type of member has no legal
rights or legal standing in the organization.
Part of the reason for the confusion is that
many nonprofit statutes and bylaws simply copied for-profit corporate
provisions, merely replacing the word "shareholder" with
"member" without further defining the concept of membership
in a nonprofit setting. In terms of establishing proper authority
and accountability for the organization, as you might imagine, this
practice has created some large voids.
Many states while formerly requiring nonprofit
organizations to have corporate members, ostensibly as a way to
make organizations accountable to the public, no longer have such
requirements. The first thing I would do, therefore, is to determine
if your state statute is one of the few remaining that requires
members. If your state does not require members, then you may eliminate
the membership provision from your bylaws (and articles of incorporation).
The old provisions should be replaced with a clear and unequivocal
statement that the organization has no members.
A frequent Catch 22: Under your current bylaws
you may need the permission of the members to amend your bylaws.
In that case, depending on your state law, you could either document
carefully in your minutes that you in actuality have not had members
for X number of years, or alternatively, you should notify appropriate
state authorities (Attorney General, Secretary of State) that you
have made every attempt to contact members to no avail.
What if your state does require members and
you do not wish to open up control of the organization to a large
body? You may wish to adopt a bylaw provision that would make the
board of directors the sole member of the organization. Although
I have not yet heard of this arrangement being challenged, some
state regulators may deem it to be an attempt to circumvent the
membership requirement. Therefore, you should make sure it is acceptable
in your state before amending your bylaws along these lines.
(Please refer to the State-By-State tab in
our Nonprofit Law Resource Library to link to your nonprofit statue.
We would be glad to help you review the statute and your bylaws.)
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