Article

Legal - Bylaws, drafting

Organizational Structure

Drafting corporate bylaws

 

Bylaws are “any of a set of rules adopted by an organization or assembly for governing its own meetings or affairs.”1 This document specifies the basic rules by which the organization will function. State laws may govern certain aspects of the rules formalized in the bylaws. The advice of an attorney is important. These bylaws are developed by the organizing individuals before incorporating. They will be adopted at the first board meeting, and changes will require board approval thereafter. A membership organization may require approval of the membership for changes.

 

Each section in the bylaws is called an article. Articles may be subdivided into sections. The following topics may be appropriate subjects for articles in the bylaws. If the content of this section is relevant, then a section of an article should answer the question in a rule or bylaw. 2

 

1. Name

The name of the nonprofit corporation must be specified.

 

2. Purpose

The purpose of the corporation must be consistent with those permitted under state law and Section 501 (c)(3) of the Internal Revenue Code. Check the Secretary of State web site in the state of incorporation and www.irs.gov for guidelines and suggested language.

3. Office

Specify the location of the office of the corporation.

4. Rules for membership organizations

If this nonprofit organization has membership, write rules that explain:

How a person becomes a member    Whether members have voting rights, and how those rights work Under what circumstances a member can be suspended or expelled, and how that process works How a member voluntarily relinquishes membership (resigns) How membership can be reinstated after expulsion or resignation Details about the annual meeting: when, where, what happens on that day When special meetings are held How members are notified about meetings What constitutes a quorum to transact business Whether voting by proxy is allowed How resolutions are offered for consideration Rules that govern membership meeting (perhaps a simple reference to a parliamentary guide such as Robert’s Rules of Order)

5. Board of Directors

What are the powers of the board?

How many people will constitute the board of directors?

When are directors elected?

How long is a term on the board? When do terms begin and end?

    Note: It is sometimes desirable to stagger the terms of the first board members so that the entire board is not replaced simultaneously.

Are there special minimum qualifications for board members (e.g., residence in a certain geographic area, age, etc.)?

How often will the board meet? When will regular meetings take place? Will there be a regular day or date and time?

Who can call special meetings of the board? How much notice must be given? How will notice be given? How much notice must be given?

How many members of the board are needed for a quorum to transact business?

Can business be transacted by voting on resolutions in writing in lieu of a board meeting?

Under what circumstances or for what reasons can a member be removed from the board (failure to attend meetings, moral turpitude, etc.)?

How will vacancies be filled? Will the replacement director simply complete the term of the person being replaced?

Will board meetings be governed by parliamentary rules? Specify the guide.

Specify that members of the board are not compensated.

6. Officers

How many? What are their titles? Can one person hold more than one office?

When are officers elected and what is the term of office? Who elects officers – the board or the membership of the organization?

Under what circumstances can a board member be removed from office?

How are vacancies (other than the expiration of terms) filled?

What are the powers and duties of the officers?

7. Delegation of powers

Which powers of the organization are delegated to the operational director (chief executive officer, manager, director)?

Which powers are reserved to the board?

Who negotiates contracts? Who can make loans? Who signs checks?

 

8. Fiscal year

When does the fiscal year begin and end?

 

Article 10. Amendments

How will bylaws be altered, amended, or repealed, and new bylaws adopted?

Article 11. Books and Records

Nonprofit status requires that the corporation keep correct and complete books and records of accounts and of the minutes of the proceedings of its members, board of directors and committees having and exercising any of the authority of the board of directors. Records must be available for inspection at all times. See state laws and the IRS rules related to recordkeeping.

Article 12. Dissolution or Sale of Assets

Under what circumstances can this organization be dissolved? The disposition of remaining assets after payment of debts is governed by Section 501(c)(3) of the Internal Revenue code. Those remaining assets must be paid over to some other charitable organization(s), and no part of the assets can benefit or be distributed to an officer, director, member or employee. See state laws and the Internal Revenue Code. ___________________ 1 “Bylaw,” Webster’s New World Dictionary, Third College Edition. New York: Prentice Hall General Reference, 1991. 2 Outline of content adapted from “Model Bylaws,” Vermont Secretary of State, Corporations Division. Retrieved May 14, 2008, from http://www.sec.state.vt.us/corps/dobiz/npo/sample_bylaws.htm

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DISCLAIMER

This work is supported under a five-year cooperative agreement # H235V060016 awarded by the U.S. Department of Education, Office of Special Education and Rehabilitative Services, and is administered by the Pass It On Center of the Georgia Department of Labor – Tools for Life.  However, the contents of this publication do not necessarily represent the policy or opinions of the Department of Education, or the Georgia Department of Labor, and you should not assume endorsements of this document by the Federal government or the Georgia Department of Labor.

 

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Title: Legal - Bylaws, drafting
Module: Organization
Author: Trish Redmon
Audience: Administrator
Sub Title:
Procedure:
Organization Source: Pass It on Center
Last Reviewed: 02-10-2010 11:02 AM