Need to make a change to your Board? Easy peasy with this Guide.
We often receive requests for assistance to change the makeup of a Nonprofit Board of Directors and/or Officers. Perhaps the organization has a Director who is “Missing in Action”, or there is an unreconcilable difference as the vision and direction of the nonprofit, or you’ve made a decision to increase or decrease the number of Directors that make up your Board.
Whatever the reason, this post is a reliable guide for you to use to make these changes to your Nonprofit Board of Directors, and it also provides a link to two templates to help you get the job done: The first is called an Action by Unanimous Consent, and the other is a normal Board Resolution.
Why is a Nonprofit Board different than that of a For-Profit Corporation?
The reason this process differs from that of a for-profit company is simple: Normal corporations, LLC’s, partnerships etc. are ultimately governed by the owners, a.k.a. Shareholders. The shareholders provide a strong line of defense when it comes to governance of the Corporation in the case of a failure of the Board of Directors.
However, because a Nonprofit Corporation is a “non-stock” type of Corporation, it does not have owners/shareholders to serve as the ultimate authority to govern the Corporation. Therefore, nonprofit corporations are ultimately governed by the Board of Directors.
This is why it is crucial that the succession of Directors is fail-proof in a nonprofit; it is also the reason that a nonprofit’s bylaws are carefully constructed to provide a clear plan for succession of Directors – and why the Board of Directors must abide by the particular rules as set forth in its bylaws.
The bylaws are the “laws” that govern the Nonprofit, and the Directors are the “rulers” who make decisions for the organization in accordance with those bylaws.
Any 501(c)3 Nonprofit set up by InstantNonprofit.com was provided a quality IRS-friendly Bylaws document, which sets out specific provisions to guide the Directors in case of a need to add to or change the lineup of Directors and/or Officers.
PLEASE NOTE: This Guide is written in accordance with Bylaws as provided to customers of InstantNonprofit.com. For Bylaws sourced elsewhere, it is crucial that the Directors (usually via the Board Chairman a.k.a. President) examine and follow the Bylaws for their organization.
GUIDELINES FOR REMOVING/REPLACING A BOARD MEMBER:
When conducting this business, there are two options:
Easiest: Action by Unanimous Written Consent
If the Board of Directors (including the Director who will no longer serve on the Board) agrees unanimously to make the change, no meeting is necessary. Steps are as follows:
- The Board shall prepare, and ALL Directors shall sign, an “Action by Unanimous Written Consent” document, specifying the changes to the Board of Directors. We have designed a version of this document which may be downloaded here.
- While it is not a requirement, the vacating Director may or may not submit their resignation, for posterity and recordkeeping.
Default Method: Removing a Director or Officer in the absence of One or More Directors
If, for whatever reason, the Chairman/President of the Board is unable to obtain a unanimous vote on this matter, the normal method for this action is as follows:
1. Understand the rules
Locate articles in your corporation’s bylaws that outline the procedure to elect and remove members from the board of directors and/or officer roles. Your bylaws will specify any required period for advance Notice of Meeting, the type of Notice you must provide, and how many directors/shareholders must be present to vote.
2. Provide proper Notice of Meeting
If you have a previously scheduled Annual or Periodic Meeting of the Board of Directors at which time this matter can be addressed, no notice is required for this action.
If not, you must request a Special meeting of the Board of Directors via email or other electronic means, and/or postal mail. The purpose of the meeting, date and time should be listed on the request. Notice must be provided to all Directors entitled to vote on the matter. InstantNonprofit’s bylaws allow electronic notice.
3. Draft a Resolution
Prepare a Board of Directors Resolution and, if possible, present it ahead of time to the members of the Board, requesting informal discussion to cover any questions – this will help guarantee a smooth and speedy proceeding and vote. Click here to download a Board Change Resolution Document Template by click here.
4. Ensure that a “quorum” is present
The “quorum” number is set forth in the corporation’s bylaws; all Bylaws provided by InstantNonprofit.com define a quorum as a majority of the Directors eligible to vote.
5. Conduct the Vote
Hold the proceeding to vote on the Resolution to amend the board of directors/officers. If the majority of directors vote in favor of the proposed change to its members and/or officers, then the changes become official!
6. Record the Vote
Results of the vote should be recorded in a standalone Resolution, and also in the corporation’s meeting minutes. A vote to adopt the minutes of the previous meeting is generally included as an agenda item of every regular meeting of the Board of Directors.
6. Report to the State
The corporation will notify state authorities on the change as applicable, and generally only at the time of filing the organization’s Annual Report (also known as the Periodic Report, or Statement of Information; the term varies from state to state) with the Secretary of State. No special reporting is necessary; this is part of the normal periodic reporting process for every nonprofit, regardless of such changes.
7. Report to the IRS
The corporation will notify the IRS of the change when completing the annual Form 990 – the Nonprofit’s version of a“tax return”. Again, no special reporting is necessary; this is part of the normal periodic reporting process for every nonprofit, regardless of such changes.
Note: Depending on the expertise of the board members, the organization may need to seek the legal advice of an attorney or nonprofit expert to assist on this matter.
That’s it! Those are the steps to remove, replace or add to your Board of Directors. If you enjoyed this post, like and share it!
Now that your ready download the forms.
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