Nonprofit Bylaws – The Dos and Don’ts

Bring up the subject of a nonprofit’s bylaws and you are sure to get an interesting response.  For many nonprofit’s, their bylaws are just some forgotten document, full of legalese, gathering dust in a file cabinet somewhere.  No one on the current board of directors knows who prepared them, nor what any of the provisions mean.  They certainly are not referring back to them for any reason.  For a nonprofit that actively uses its bylaws, the bylaws can be an interesting glimpse into the organization’s governing psyche.  Are they control freaks…or just the opposite?

One fact is sure:  a nonprofit’s bylaws are considered a legal document that dictates how the organization must be governed.  Failure by a board to follow the stipulations outlined in the bylaws can have devastating consequences to the organization…and potentially even to the board members themselves.  Since bylaws are such a big deal, it stands to reason that what they contain and how they are used should be taken extremely seriously.  But what about that?  Let’s take a look at some Dos and Don’ts regarding nonprofit bylaws.

DO:  Get assistance in drafting or amending your bylaws from an expert experienced in nonprofit matters.  This could be an attorney or a professional services firm like Foundation Group.  Two words of caution here:  1)  Don’t assume your attorney understands nonprofit issues.  We have helped fix countless attorney-prepared bylaws, and 2)  Bylaws are a legal document, so using a non-attorney professional means you are getting self-help assistance.  It is still the board’s responsibility to have input into the provisions and to vote to adopt the final product.

DO:  Stick to the basics.  It is a good practice to think of your bylaws much like the US Constitution.  Like the Constitution, your bylaws should deal with only the highest level of governing issues such as:  Organizational purpose, board structure, officer position descriptions and responsibilities, terms of board service, officer/board member succession and removal, official meeting requirements, membership provisions, voting rights, conflict-of-interest policy and any other non-negotiables that your governing body deems necessary.  One critical element often erroneously omitted is the provision for amending the bylaws in the future.

DO:  Know what is in your bylaws.  As a board member, you have a duty to understand what each and every provision means.  If there are provisions you do not understand, ask another board member or consult a professional.

DO:  Follow the provisions religiously.  You not only have a duty to understand your bylaws, you a legally accountable for following them.  This is not optional.  A court of law will side with your bylaws in any dispute brought by another board member, an employee, volunteer or recipient of services who may have a grievance.

DO:  Keep your bylaws relevant.  Times and circumstances change…and your governing document should reflect those changes.  If your bylaws need to be amended to reflect current realities, do it.  Make sure the changes make long-term sense (see below) and follow the amendment procedures as outlined.

DON’T:  Treat your bylaws as a policy and procedure manual.  We have seen bylaws that contain everything from employee vacation rules to the organization’s anti-smoking policy.  These are totally inappropriate for bylaws.  Create a separate policy manual for management purposes.  Again, think Constitution vs. US Code (laws).

DON’T:  Include provisions that tie the hands of future boards.  I currently sit on the board of an HOA with absurd provisions that negatively affect all homeowners.  But, amending them requires a 2/3 approval of every member eligible to vote (about 200 households).  We can’t get 2/3 of the members to vote, much less get super-majority approval.  Think long and hard about the downstream consequences to all provisions.

DON’T:  Fail to review the bylaws.  At least annually, all board members should re-familiarize themselves with the provisions.  This will go a long way toward preventing costly errors.  New board members should be provided with a copy immediately upon installation.

Proper use of an organization’s bylaws not only provides the necessary structure to effective governance, it eliminates the willy-nilly guesswork so common among ineffective nonprofits.  Good governance establishes a foundation for good work.

Greg McRay is the founder and CEO of The Foundation Group. He is registered with the IRS as an Enrolled Agent and specializes in 501(c)(3) and other tax exemption issues.

This Post Has 9 Comments

  1. Pingback: Tweets that mention Basics of Nonprofit Bylaws | Foundation Group Blog -- Topsy.com

  2. Gayle L. Gifford, ACFRE

    Greg,
    As a consultant to nonprofit boards, I see lots of bylaws in the course of a year and most of them make me cringe.
    I want to reinforce how seriously US courts take the bylaws. We’ve had at least two cases locally in which disgruntled donors or members took action … both came down to what the bylaws said.
    Thank you for such a straightforward approach. I really appreciate the Constitution vs US Code metaphor and plan to use that from now on to help explain the difference… giving full credit to you, of course.

  3. Pamela Grow

    Excellent post Greg. Like Gayle I appreciated the Constitution vs US Code – makes it an easily understood concept. I’ll be forwarding this on to a few clients – thanks!

  4. FRANK

    IT’S GOOD ADVICE WHEN IT COMES FROM SOMEONE LIKE YOU, WHO IS CURRENT AND KNOW THEIR STUFF.

    THANKS,
    Frank

    P.S. EMAIL ME YOUR TAKE ON BROAD EXECUTIVE AUTHORITY. For Minstry 501c3, not a Church, Just Ministries/ Outreach, etc.

  5. George G. Shepherd

    Having just completed the by-laws for my nonprofit the rampAtheater Inc, I found this article informative. I have a few changes to make. Thank you.

    Sincerely,
    George G. Shepherd

  6. Karen

    Greg, you have an extraordinarily informative site. Question: I am looking to access the bylaws of a California nonprofit. They are unwilling to disclose this information to their employees and members. Is there anything I can do to obtain this info without legal action?

    Sincerely,
    Karen Williams

    1. Greg McRay, EA

      If you are a stakeholder of some sort, there should be no reason to deny your access. Even if you are not, such items are generally subject to public record if the organization is a federally recognized 501c3. If your appeals to the board are getting you nowhere, you may find it difficult to without legal action. You could request from the IRS a copy of the organization’s original tax exemption application which should include the bylaws from that time. Of course, the IRS wouldn’t have any updates or amendments to the bylaws post-501c3 application. My guess is that if an attorney contacted the board on your behalf, you’re likely to see a change in attitude. Good luck!

  7. John

    I am an incoming executive director for a non-profit. Years ago the board voted in a request by staff/employees (all management heads) to have a vote in the Board of Directors meeting. 1) Shouldn’t be board members alone have the vote on business matters for the organization?
    2) Should I push to change the by-laws of the organization/board members to change it?

    There voice should be heard but I don’t believe that the employees should be voting at board meetings. Am I off base by thinking this?

    Thank you for listening/reading.

    1. Greg McRay

      Your instinct is correct. Board members should be the only ones voting in a board meeting. The only exception might be certain issues that the board wishes to get employee buy-in. Even then, it should be done infrequently. Employees with full voting rights in a board meeting essentially have governing authority with no liability or accountability. Even in a member-run organization, members typically only vote on issues brought before the membership by the board.

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