New case law illustrates importance of reviewing nonprofit bylaws

Nonprofit corporations create bylaws when they are established, but two recent legal cases affirm that creating bylaws is not enough.  Those bylaws need to be reviewed (and possibly updated) on a regular basis.  Bylaws help to establish rules regarding membership and the organizational structure and operation.


Recent cases have arisen due to disputes regarding the definition of “membership” and the nature of the members’ voting rights.  In both situations, dissatisfied members of the nonprofits rallied others to join the organization to become members and participate in the organizations’ annual meetings in order to vote in new leadership.  In both cases, the bylaws were not clear regarding what it took to become a “member” who was eligible to vote, which made the cases complicated and the nonprofits vulnerable.


These cases illustrate the importance now, more than ever, for nonprofit directors and boards to review bylaws to ensure internal practices comport with the nonprofit’s rules and long-term goals. In doing so, you may discover idiosyncrasies within the bylaws that may need amendment and definitions that need to be edited or modified to comport with current or desired operations.


As you review the nonprofit’s bylaws, pay particular attention to the following:
  • How are members defined?  Be specific about precisely when people achieve member status.  Is it when they turn in completed paperwork?  Is it the moment their check for membership dues clears the bank or when the check is delivered to the organization?  Is membership determined by volunteer hours, donations, or both?  In what time period must volunteer hours be completed and how are they tabulated?  Be as clear and specific as possible.
  • What are members’ voting rights?  On what issues are they allowed to vote?  How does their voting power differ from that of the directors?
  • How can you change the bylaws?  The founders of the organization may have made it simple or cumbersome.  The founders’ vision may have differed from the current vision of the membership and/or directors.  Either way, if changes are needed, you must follow the bylaws to make any amendments to the bylaws official and defensible.
  • If you discover an area where a practice has diverged from that specified in the bylaws, change the bylaws or change the practice.  Adherence to bylaws is critical to avoiding legal troubles.

Lawsuits among nonprofit organizations can be especially disastrous, carrying the potential to drive away crucial volunteers and stir negative emotions and reactions from donors, members, and directors.  Periodic reviews and updates during times of relative calm will help ensure everyone knows the rules and avoid legal and interpersonal contests that may distract from the nonprofit’s mission.

For more information on bylaws and other legal issues for nonprofit corporations, contact Joe Veenstra at 608-784-5678.


Select a tag below to view all posts with that subject.

Please Share Me On