A nonprofit’s bylaws are not just another document sitting in the organization’s record book; instead, they serve as the organization’s legal guidepost. Bylaws establish how directors are elected, how meetings are conducted, what authority officers possess, and how major organizational decisions are made.
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What legal considerations do outdated bylaws create?
Many nonprofits continue operating under bylaws that have not been reviewed in decades, even as their programs, governance practices, and applicable laws have evolved.
Outdated bylaws can create unnecessary legal and operational challenges. Changes in state nonprofit corporation statutes, IRS guidance, virtual meeting practices, and governance best practices may render older provisions ambiguous or impractical. Organizations may also discover that their bylaws no longer reflect how the board actually functions. When governance practices diverge from the governing documents, the legal considerations of procedural disputes and internal confusion can increase.
What does a bylaws review accomplish?
A periodic bylaw review allows an organization to confirm that its key governing document remains legally compliant and consistent with its mission and operations. Boards may wish to consider whether provisions addressing director qualifications, term limits, committees, electronic meetings, notice requirements, quorum, conflicts of interest, and indemnification continue to meet the organization’s needs. A review also helps to ensure consistency with the organization’s initial corporate document filed in the state of formation, and the organization’s type of tax-exempt status.
How often should nonprofit boards review their bylaws?
As a best practice, nonprofit boards may wish to review their bylaws every three to six years, or sooner if the organization experiences significant growth, leadership changes, or if there are amendments to applicable law. A thoughtful review can improve governance, reduce legal considerations, and help ensure that the organization is well positioned to carry out its mission for years to come.
Learn more about our Nonprofit Corporate Law & Governance practice.