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We Are Updating Our Organization’s Bylaws. Should We Update Any Other Documents as Well?
Yes. When updating your organization’s bylaws, you should also review your state formation documents and other key governance policies to ensure they remain consistent with applicable state and federal law.
In amending their bylaws, many organizations forget to take a look at their corporate formation document, such as Articles of Organization or Certificate of Incorporation. In most cases this document takes legal precedence over the bylaws if the two documents are in conflict, so it’s especially important to make corresponding edits to the formation document if the bylaws are being updated.
What Other Documents Should We Review During a Nonprofit Legal Compliance Check?
Most nonprofit organizations, especially 501(c)(3) organizations, should have a well-crafted conflict-of-interest (COI) policy in alignment with IRS standards. Some organizations fall short on this when they use an online template and don’t consider whether that template was designed for the state where the nonprofit was organized, as state laws surrounding conflicts of interest and interested parties can vary significantly.
Also, the type of COI policy that an organization adopts should be tailored to the particular type of tax-exempt entity. For example, many organizations which are private operating foundations or private foundations have a COI policy designed for a public charity, which can lead to failure to recognize specific situations involving self-dealing and disqualified persons. It is important in reviewing any policy to ensure that the policy design matches the organizational structure and the various IRS and state law provisions that apply.
Nonprofits should also typically maintain and review other important governance policies, such as the following:
- Whistleblower Policy
- Gift Acceptance Policy
- Document Retention and Destruction Policy
- Written Information Security Policy (WISP)
- Compensation Policy
- Expense Reimbursement Policy
- Artificial Intelligence (AI) Policy, as appropriate to the organization’s activities and evolving legal and regulatory requirements
Jova Law assists clients in drafting and reviewing corporate formation documents, bylaws, and governance policies. To learn more, see our Nonprofit Governance and Tax-Exempt Organization Compliance practices, or contact our attorneys to discuss your organization’s needs.