BY-LAWS A Guide for New York Not-for-Profit Organizations and their Lawyers The Council of New York Law Associates© 1983 by The Council of New York Law Associates Additional copies of this publication ara availahle from The Council of New York Law Associates, 36 West 44th Street, New York, N.Y. 10036, Telephone (212) 840-1541.BLE OF CONTENTS Introduction and Acknowledgements How to Think About By-Laws What are By-Laws? The Main Purposes of By-Laws Running Your Organization Resolving Conflicts Protecting Those Who Make Decisions Adopting By-Laws Writing By-Laws , ‘The Importance of Knowing What You Want Using the Questionnaire The Difference Between Members and Directors The Relationship Between Board of Directors and Staff ‘The Questionnaire: Issues for Decision . Part One: Membership Part Two: Board of Directors and Officers Part Three: Amending the Ry-Iaws Checklist for LawyersIntroduction and Acknowledgements Each year, the Council of New York Law Associates represents over one hundred not-for- profit organizations in incorporating and preparing by-laws. The Council provides advice to many additional community groups and their lawyers. We hope this booklet will be of help to everyone concemed with getting not-for-profit organizations off to a healthy start. The first half of the hooklet is directed to new not-for-profit groups and features a question- naire designed to focus attention on decisions that need to be made in the by-laws. The second half of the booklet is addressed to lawyers representing not-for-profit organizations and deals with the requirements of the New York Not-for-Profit Corporation Taw ‘The booklet was prepared by Barbara A. Schatz and Wendy P. Seligson based on a chapter in Manual on Organization, Financing and Administration of Day Care Centers in New York City, © 1971, Bank Street College of Education, New York City. We are grateful to Bank Street College for permission to adapt these materials. We are also grateful to the Greater New York Fund/United Way, which provided support for the preparation and printing of the booklet. Finally, thanks are due to our not-for-profit clients, whose energy anil dedication provide ‘constant inspiration for our workHOW TO THINK ABOUT BY-LAWS What are By-Laws? In order for your organization to function smoothly and efficiently it must have rules and pro- cedures, These rules and procedures are called by- Jaws. They make it possible for your organization to make binding decisions and then tum these deci- sions into action If your organization is incorporated, the New York State Not-For-Profit Corporation Law (NPCL) requites that the corporation have by-laws and estab- lishes certain rules to which the by-laws must cone form. Unincorporated associations are not bound by the Not-for-Profit Corporation Law, but may want t0 adopt by-laws which comply with it so that the by- laws will not need extensive changes if the associ tion decides to incorporate, The Internal Revenue Service requires that you submit a copy of your by- laws when you apply for federal tax-exemption, By-laws establish rules goveming such issues as: ‘+ Who can be a momber of your organization? + How often must members meet? + What issues will members decide? + How are members of the organization's Board of Directors chosen”? + How long do those directors serve? + How many directors must agree before a de- cision is final? + What officers will your organization have? + Who is eligible to become an officer? Many rules usually found in by-laws could be ncluded instead in che certificate of incorporation Since it is easier to amend your by-laws than to amend your certificate of incorporation, it is gener- ally better to include those rules im your by-laws Only if you want to make a rule difficult to change should you include that rule in your certificate of incorporation. The Main Purposes of By-Laws Running Vaur Organization AS you can see from the examples above, by- laws determine who has the power to make particu- lar decisions and set forth the rules that must be followed in making these decisions. By allocating power and establishing rules for the exercise of that power, you let everyone inside and outside your or- ganization know who may speak and act for it Once you have established these “official” rules nu. However, they may be cchanged in accordance with the procedures set forth in the by-laws themselves. they aie legally bi Resolving Conflicts At the beginning of an organization’s life, the climate 1S likely to be triendly and tree ot conilict People have worked together to build a program and share some common goals, As the organization grows and as differences in approach become clear, disagreements are more likely to arise, Well ‘thought-out by-laws can prevent these disagreements, fiom inmuobilizing the group, because the by-laws set forth rules for taking action even though deci sions may not be unanimous, Protecting Those Who Make Decisions By-laws help insure that the decisions and ac- tions of the organization do not become the legal responsibility of only a few of its members. If the directors have been properly elected by a properly selected voting membership, and the directors have followed the by-laws in voting to enter into a con- tract, or to incur some other obligation, that deci- sion generally is not subject to legal challenge. Adopting By-Laws By-laws are adopted at the first meeting of a new corporation (Ue “uiganizational meeting) by the incorporator(s) or by the directors listed in the cettificate of incorporation. The by-laws of an unin- corporated association may be adupied at aity tintWRITING BY-LAWS The Importance of Knowing What You Want Drafting by-laws is easy. Most lawyers can take the proper information from you and put that information in the form of by-laws which are clear and in compliance with state law. It is the step be: fore—getting the right information to the lawyer— that 1s more difficult. This step requires that your organization decide who will have the power to make decisions and how the procedures for ‘ecision-making will operate. Completed by-laws usually look complicated and rather intimidating, which may account for the impulse w find # set done by someone else and merely adopt them. This is a mistake. No by-laws of any one group can ever be exactly suited to the rnceds and peculiar ciscumstanes uf anvil group. Before adopting by-laws, think through what each by-law means for your organization, Using the Questionnaire ‘The following questionnaire is designed to help your group discuss some of the important issues Which yrn need ta decide in establishing is not a complete list, and there may be many other things you will want to add. The completed ques- tionnaire will provide a convenient utline for youe lawyer of the by-laws you want writen. ‘The Difference Between Members and Directors Before you begin using the questionnaire, it is important to understand the difference between the membership of a corporation or association. and the members of the Board of Directors. the Board of Directors is responsible for the ‘management of the organization. It consists of a rel- atively small group of people—usually not more than 20 or 25—who meet regularly during the year and who make most of the major decisions as 0 how the organization will operate In addition to the members of the Board of Di- rectors (called “Directors”), many groups choose to have members. (Certain typor of not for profit or porations are required by the NPCL to have mem- bers.) The membership of an organization may be a very large gronp.—perhaps hundreds ar thousands of people—who normally meet only once a year. The ‘major responsibilities of the members are to elect the Board of Directors and to adopt and amend hy. laws, but they may have other powers in addition, Members provide several advantages to @ not-for- profit organization: + Members typically pay dues, which can pro- vide a source of funds. + A broad membership base may be helpful in securing funding. Particularly in the case of yang arganiza. tions with Title in the way of paid staff, ‘members can help implement the organiza- tion’s programs, Membership from different segments of the community ensures that a broad base of opinions will be represented and may help provide a favorable climate for the organiza tion’s programs There are also certain disadvantages: + The operation of a membership organization can be time-consuming (calling uwctings uf the members for the election of directors or for other business as provided in the by- laws; ending proper notises of the mesting and ensuring that a quorum is present; col- lecting dues or enforcing other requirements of membership; keeping in touch with the members via newsletters or other correspond- ence). + A. structure which gives members a large role in running the organization may be un- wieldy ‘The important thing to remember is that a member of the organization is not the same as a member of the organization's Board of Directors. ‘even though one person may have both roles, Mem-4 maaws bers of the organization and members of the Board have separate and distinct responsibilities. and powers, The first section of the questionnaire discusses the by-laws which apply to members of the organi- zation, The second section discusses the by-laws which apply to members of the Board of Directors and officers of the organization, ‘The Relationship Between Board of Directors and Staff The Board of Directors of a not-for-profit or- ganization and. in some organizations, the members, have the responsibility for making major policy de- cisions. Responsibility tor making day-to-day deci- sions and for implementing policies may be assigned either to the Board or to paid staff members, or may be divided between them, The division of fabor de- pends on several factors, including the skills and in- terests of Board members and staff; the amount of time Board members are prepared to devote to the organization; and the amount of authority the Board wishes to delegate to the staff. No law prohibits paid staff members trom serv ing on the Board of Directors. However, in order to keep divisions of responsibility clear, many organi: Zaions adopt thls promibidot a a mawer OF policy The by-laws need not spell out the respon- sibilities of the executive director or other paid staff members, these matters can be dealt with by Doard resolutions, However, it may reduce the potential for conflict if the by-laws cover at least a few basic issues. For example: + Who will have the responsibility tor hinng, staff members other than the executive diee- tor? You may want to delegate complete authority to the executive director. Ur you may wish to give the executive director the responsibility for soliciting, interviewing and recommending. candidates for employment, ‘while leaving the final decision to the Board. + Who will have the authority to fire paid staff? What standards will be used? What procedures will be followed? + Who will he responsible for promulgating or revising job descriptions and personnel pol- icies for staff members other than the execu- tive director? + Who will be responsible in the first instance for ensuring that funds are properly ex- pended and that adequate financial records are kept? Many organizations delegate these tusks to the executive director. Others re- serve them for the Treasurer + Who will be authorized to sign checks and ther financial instruments? For example, {you may want w authorize the executive di rector and all of the officers to sign checks, but require that each check bear two signa tuies. Or you may want to authorize the ox ecutive director to sign alone all checks below a specified amount, but require checks for larger amounts to boar the co signature of cone of the officers.THE QUESTIONNAIRE: ISSUES FOR DECISION PART ONE: MEMBERSHIP A. Who are the members of your organization going to be? In this by-law you are deciding who will control your organization. If you define too small a group of people. your organization may become controlled by a small clique. You may also find that you lack enough people to do the day-to-day work of the organization. If you make the membership t00 large, you may be including people who are not really interested in your program, or you may find your organization being Pulled anto political battles which have nothing to do with your program. Suggestions Some or all of the following: + Anyone who asks to join + Anyone who asks to join and is voted in + Anyone who has a special relationship with your organization Examples + For a black or community association: anyone who lives in the neighborhood, * For a day care center: all parents of children enrolled in the center plus all staff members + For a battered women’s program: anyone with an interest in addressing the problem B. How do potential members become members? Suggestions + By paying dues + By signing a card + By writing a letter and receiving confirmation of membership from the Board of Directors C.How long do members continue ta he members?6 pysaws Suggestions + One year + Two years + As long as they pay dues + As long as their special relationship continues (e.g., living In the nelgnborhood oF sewing Uicit obit: dren to the day care center) D. What are the powers of the members? Tht is, what matters can be decided at members’ meetings? Usually members have two major responsibilities: electing the Board of Directors, and amending by-laws But you may give them responsibility for other decisions if you wish Examples + Responsibility for decisions to expand the neighborhood served by the organization + Responsibility for decisions to move to new office space + Responsibility for decisions with the effect of reshaping the organization If you give the membership many different powers, your organization will be more democratic and less able to be controlled by a small group. But it will also be slower and leys efficient since very important decisions will have to wait until a full membership meeting is convened. E. How often should the members meet? ‘The NPCL requires at least one membership meeting per year. The by-laws may call for additional meetings. Be careful not 10 require too many meetings, because meetings required by the by-laws must be held. F. How many members are necessary for a quorum? (That is, how many members must be present for a members’ meeting to be an official meeting at which business can be transacted?) This is an important decision because no meeting of members can begin until a quorum is present. A hhigh quorum requirement helps ensure broad participation in decisions but may pose difficulties if many of ‘your members find it difficult to get to membership meetings. A low quorum requirement makes it easier to hold a meeting but allows a small number of members to make decisions which bind the entire group, Suggestions ‘The size of the quorum generally depends on the total number of members in an organization, If there areTHE QUESTIONAIRE: ISSUES FOR DECISION — 7 only twenty or thirty members, and you think you can get most of them to a meeting, you might make the quorum half or even two-thirds of the members. If you have hundreds of members, you might set the quorum. quite low. at 20% af the members or even 10% G. Who may call meetings of the members? The annual meeting is fixed in the by-laws. The by-laws should also state who can call additional or “special”” meetings. Suggestions + The executive director of the organization + The president of the Board of Directors + Any two directors H. Who chairs meetings of the members? The president of the Board of Directors often chairs members’ meetings, but you may name someone else. For example, you might decide that the members will elect a chairperson from among the membership. 1. How many votes are needed to pass a motion at a members’ meeting? Suggestions For general items of business, a simple majority (one half of the members present plus one) is probably sufficient. though you can specify a greater percentage if you wich. For epscial iteme of business you may want to specify that more than 2 majority vote is needed. Special items might include actions like removing officers of directors or changing by-laws. May members vote by proxy (assign their rights to vote to another member so that their votes are counted even though they do not attend a particular meeting)? You may specify that only members attending a meeting may vote, However, this requirement could result in fewer people participating in your organization, You must decide whether the value of face-to-face sontact outweighs this possible disadvantage, “You shuul also be aware dhat the NPCL permits action t0 ve taken by members without a meeting if all the members sign a written consent to the proposed action,8 rw K. What is the last date prior to a membership meeting on which people may become members with voting rights at the upcoming meeting? Establishing an objective rule in this area is important if you have a large group. Even if you have a small group. you may want to avoid informal decision-making on this issue. L. Would separating your membership into special classes be useful to your organization? It your organization is made up of members representing very different interests, you may want to establish special classes of members with different rights. However, since this requires more record-keeping fand makes organirational matters moro difficult, you must deside if thie prosedure ic worth the # effor. Special classes are most commonly used 10: + Permit different groups or classes of members within the organization to elect specific directors as their representatives: or + Give voting rights to certain categories of members but not to others Examples + Anyone with an interest in a school or day care center may be a member but only parents of enrolled children have the right 10 vote. + Ina coalition of community groups, members of each constituent group have the right to appoint a certain number of directors IC you want « establisle a Classified wenubeishiy you need «9 specify 1, Into what classes will your membership be divided? What voting or other privileges will be reserved for particular classes? 3. What will constitute a quorum for each class?THE QUESTIONNAIRE: ISSUES FOR DECISION 4, When there is a quorum of the class, how many votes will be needed to make a decision? M. Do you want to allow “‘cumulat re voting” for directors in your organization? This method of voting tor directors allows those with a minority interest to have an increased say. In the election of directors, it permits each member to cast all the votes to which he or she is entitled for one or more directors. (E.g.. if a member is entitled to vote for eight directors, he or she may cast all eight votes for the same candidate.) PART TWO: BOAKD OF DIKECIORS AND OFFICERS ‘The Board of Directors of an organization makes most of the decisions about how the organization will operate. In other words, the Board conducts all the business of the organization which is not specifically assigned to the membership by the by-laws. The Directors are responsible to the membership which elects them, A. Who is eligible to be a member of the Board of Directors? May staff members serve? Suggestions + Only members of the organization + Only persons in the neighborhood or active in your field + Anyone who is interested B. Will there be special categories of directors? Special categories can help insure that you will have a balanced Board which represents a variety of interests. However, they may needlessly complicate your organization, Example ‘The Board of an economic development organization might consist of three community member directors, wu direciory from ie business community, the former chairperson oF tne Woard and three directors from the membership at large1 aycaws C. How many members of the Board of Directors will there be? State law requires at least three Board members, ‘Suggestions Between nine and nineteen is 2 good size for talking and deciding. A larger board may be appropriate if it is important that many different groups or interests be represented or if the Board is expected to carry out much of the substantive work of the organization (e.g issiing reparts and position papers) D. How will the members of the Board of Directors be selected? Suggestions + ‘The members will elect the directors each year at the annual meeting, with nominations from de aun + A nominating committee will propose candidates for election + A nominating committee will propose candidates for election hut additional candidates may run by petition of a certain number of members F. How long will Board members serve? Usually one, two, or three years, “Staggering” the terms, so that only part of the Board is elected each year, 1 a good idea Decause it gives the Board more stability and conuinu F. May Board members serve two or more terms in a row? Limiting the number of terms @ board member may serve is one important way of keeping a Board of Directors from becoming a permanent clique, but may deprive the Board of valued leaders. G. May Board members be removed from the Board of Directors before their terms are over? If so, how?THE QUESTIONNAIRE: ISSUES FOR DECISION IL You may want to permit a member of the Board to be removed if he or she fails to attend meetings regularly or for some other reason. The by-laws can be specific (e.g., stating how many meetings Board members may miss and hy permit removal “for cause they will he informod af their remaws ” or “without cause”) HF thoy mice tom many) or general (e.g 1H, How will Board members be replaced if they resign or are removed before the end of their terms? ‘Suggestions + The other Board members elect a replacement to serve until the next membership meeting, + The Board calls a special membership meeti + The members of the organization, when they elect Board members, also elect substitutes who automat. ically become Board members if regular members resign, for the election of a replacement. How often will the Board meet? When and where will the Board meet? Boards typically meet once a month and sometimes, if there is an executive committee, as few as four times per year. The time and place need not be specified in the by-laws, particularly if they are likely to change, I. How will meetings of the Roard af Directors he called? Wha will call thom? Usually Board meetings are called by written notice, mailed to each Board member at least several days efuie the ineeting, but you may want 10 set UP some other system. YoU also need to decide who can call a meeting of the Board if the Board itself has not set the time and place at the previous Board meeting. You might restrict this right to the Board President or make it available to any two directors. K. May the Board take action if one or more members is participating by conference telephone? ‘This procedure is useful if you know that some Board members who want to be active will have a hard time being present in person at meetings. The NPCL requires that the conference telephone system allow all paicipants in de meeting w bear each ether.12 aetans L. May the Board or a committee take action without a meeting if it obtains the written consent of all members? M. What is a quorum for a Board of Directors meeting? N. Isa simple majority (one half the Board members present plus one) enough to pass a motion of the Board of Directors? Romombor that 4 majority here moan 4 majority of the quorum, not a majority) of all the Roard mem- bers. Therefore, if you have thirteen Board members and seven is a quorum, if seven Board members are present, a vote by four of them can pass « motion 0. Will the Board have an executive committee or any other regular committees? If so, how will the members of these committees be chosen? Many groups find it convenient to have an executive committee or other standing committees empowered to act between Board mectings. The power to create there committeor should be at forth in the by-h Board may then choose whether to exercise this power. vs: the Ave there any regular reports ol during the year? from the staff or officers ‘The Board may request reports whether or not the by-laws require them, But you may want to specify in the by-laws such reports as: + An annual financial report from the treasurer + Quarterly statements of income and expenditure from the bookkeeper or accountant + Evaluation reports on each staff’ member from the director + Evaluation of the program by staff or by a special committeeTHE QUESTIONNAIRE: ISSUES FOR DECISION 13 Q. What officers will the organization have? Generally ue omhicers ate Presklent, Vice-President, Treasurer and Secretary. they may be given different titles such as Chairperson, Vice-Chairperson, etc. You may want to have additional officers How will these officers be elected? anally afficers arm elected by the Board members at the annual Board meeting, but some groups prefer that the members elect officers at the annual membership meeting. The officers typically are members of the Board of Directors but are not required to be; they may be members of the organization only or even paid staf? members, How long will officers serve? Officers may serve for one, two, three or more years. However, if your officers are elected from among the Board, and you have a “staggered” terms Board, you may want to limit the term of the officers to one year, TT. Haw may officers he remaved hefare thet Usually officers may be removed before their terms end only by the same people who elected them (the membership or the Board, depending on your answer 10 question K). It you Wish, the by-laws may specity grounds for removal U. How may officers be replaced they resign or are removed before the end of their terms? Decide who will be cesponsible for proposing dheir replacements (e.g., @ committee or an individual). Then, if officers are normally elected by the Board, you will probably want the Board to elect the replace- ments. If officers are normally elected by the members, decide whether the members or the Board will select the replacements.4 priaws Y. What are the powers of the President? In most organizations, the President presides over all meetings and has the authority to sign legal docu- ‘ments on behalf of the organization, sometimes only after the Board has approved the contract or document. You may give the President additional powers. W. What are the powers of the Pr lent? Usually the Vice-President’s main responsibility is to act as President when the President is unavailable, but you may want to specify additional responsibilities in the by-laws. X. What are the responsibilities of the Secretary? ‘The Secretary usually is responsible for all written records of the organizition, especially notices of meetings, minutes of meetings and the official correspondence of the Board. This does not mean that the Board Secretary needs to da the actual writing and paper work—that can be done by a paid clerk or secretary But the Secretary is responsible for seeing that accurate records are kept Vo What are the recpon ilities of the Treasurer? ‘The Treasurer usually is responsible for all financial records, and for preparing financial statements and reports tor the Board. A Ireasurer does not ACwally Keep ike DUUKS UF aut dei AF paid bookKeepers «nd accountants are involved. PART THREE: AMENDING THE BY-LAWS ‘Ouve your vrganization has adopted by-laws, you must abide by them until they are amended. Your hy- laws therefore should specify the procedures for amendment. The amendment provision is clearly an important ‘one, since the power to change the by-laws is the power to change very significant aspects of the organization ‘A. Who can change the by-laws?THE QUESTIONNAIRE: ISSUES FOR DECISION 1S Unless you specify that only the membership can change the by-laws, then either the membership or the Board of Directors can change them. B. By what vote can the by-laws be changed? ‘Suggestions ‘You may want to require 2 higher quorum than usual or a greater proportion of the vote in order to change dhe by-laws. For instance, if a majority vole is required wo pass a resolution, you might require a two- thirds vote to change the by-laws. Alternatively, you might require majority votes at two successive meetings of the members or the Board of Directors before the by-laws can be changed Many additional items may be covered in the by-laws. The above list provides only for decisions on basic. matters.CHECKLIST FOR LAWYERS ‘The following checklist, which conforms to the lettered questionnaire in the preceding sections, is designed to alert the attomey to decisions which cli- ents should make concerning membership, directors and officers. It also sets forth the relevant provisions of the Not-for-Profit Corporation Law (NPCL). The checklist is not, however, an exhaustive guide 10 topics which might be covered in an organization's by-laws: section 602(f) of the NPCL provides that by-laws may “contain any provision relating to the business of the corporation, the conduct of its af- {airs its rights or powers or the rights or powers of ity members, directors OF officers not Inconsistent with the NPCL. with any other New York State law or with the certificate of incorporation. The MPCL allows a fait aiwunt of leeway i establishing by-laws. However, in many instances, the procedure in the NPCL governs automatically if 4 corporation fails t0 sstublish an alternative prow sion. The attorney should make the corporate client aware that failure to make a decision is generally a decision to abide by the NPCL provision, The st- tomey may be able to stimulate decisions on unad- dressed questions by providing advice on the Practical consequences af the Provisions governing the operation of a corpo- ration may in general be included in either the cer- tifieate of incorporation or the by-laws and these alternatives are set forth below. Most such provi sions should be reserved for the by-laws since by-laws may be changed without governmental ape proval. Amendment of a certificate of incorporation, ‘on the other hand, requires the same approvals by goverment agencies and officials as are necessary to form a not-for-profit corporation In a few situations, specified below, a by-law adopted by the members (rather than by the Board) is required in order to deviate from the NPCL. By- laws adopted initially by the incorporators are deemed to be by-laws adopted by the members NPCL See. 602(a) lable alternatives PART ONE: MEMBERSHIP A. Corporations formed as type A, C and D cor: porations (under section 201(b) of the NPCL) must have members. Type B corporations may choose whether (0 have members. If there will be no members, then the certificate of incor- poration or the by-laws must so state. Individue als. corporations, joint-stock associations, unincorporated associations and partnerships may all be members of a not-for-profit corpora- tion. NPCL Sec. 601(a), Membership may be effected and evidenced by membership cards ar certificates or other meth- cds specified in the certificate of incorporation or by-laws. NPCL Sec. 601(c). If a corporation wishes to levy fees. dues. or assescments on its members, the certificate of incorporation or by- laws must so specify. NPCL Sec. 507(a). Unloso otherwise provided in the certificate of incorporation or by-laws, membership is termi- nated by death, resignation, expulsion, expira- tion of membership term or dissolution of the corporation. NPCL See. 601(@). Members have the right to adopt, amend or re- Peal by-laws. Unless the certificate of incor- poration or by-laws otherwise provide, the Board of Directors also has this right. NPCL. Sec. 602(b). An annual mecting of dee mem bers must be held for the election of directors and the tansaction of other business on a date and at place seal by v1 wines the by-laws, NPCL Sec. 603(b). Atleast one class of mem- bers must have full voting rights; however, the contificate or by-laws may provide that sone classes of members have no voting rights, or rights to vote only in specified matters. NPCL Seo. 612, As noted above, the members are required to hold an annual meeting. NPCL Sec. 603(b). Additional or “special” meetings may be called at any time by the Board or by anyone author- ized in the by-laws or certificate of incorpora- tion, ay well ay by @ writen demand of ten percent of the members eligible to vote. NPCL Sec. 603(c). Requirements as 10 notice of meet- ings are set forth in NPCL Sections 605(a) und 606. ‘A quorum exists at a meeting of the members when members entitled to cast a majority of the total number of votes at such a meeting are 718 brLaws present. NPCL Sec. 608(a). The by-laws or certificate of incorporation, however, may pro vide fin a Iesset quvtuin, dhe aninimum is mem: bers entitled to cast 100 votes or one-tenth of the total number of votes, whichever is less. NPCL Sec. G0B(b), ‘The certifieate of incor poration or a by-law adopted by the members may also provide for a greater quorum, NPCL See. 615(a)1). noted on the face of any membership card or certificate issued. NPCL Sec. 615(c) See point E above and NPCL Sec. 603(c). Such @ requirement must be ‘The NPCL is silent on this issue. ‘The by-laws or certificate of incorporation may specify the proportion of the vote at a member- ship meeting necessary to elect the Board of Directors; a pluraity 1s required if no other proportion is specified. NPCL Secs. 613(a), 615. The certificate of incorporation or the by- laws may also specity the proportion of dhe vote at a meeting of the members necessary to transact any business or any specified item of business ules Ue no proportion is specified, a majority vote is required. NPCL Sec. 613(b). A requirement of a4 layer proportion of votes must be set forth either in the certificate of incorporation or in a by-law adopted by the members (NPCL Sec 615(@)(2)) and must be noted on any membor ship card or certificate issued. NPCL Sec. 615(c). Each member has one vote, but the cer- tificate of incorporation or by-laws may provide that organizational members shall be entitled t0 Votes substantially proportional to their mem- bership. NPCL Sac. 611(0) the election of dircetors: if Proxies are authorized under rules set forth in NPCL Sec. 609. The by-laws or certificate of incorporation may specify that proxy voting is rot permitted and may change the rules govern ing the use of proxies. NPCL See. 609. If the by-laws or certificate of incorporation so provide, the by-laws may specify or the board may fix a record date to determine the members entitled to vote or to take any other action or to receive particular benefits. NPCL Sec. 611(). If a record date is authorized by the certificate ‘of incorporation or the by-laws but none is L. a fixed, the record date for the determination of ‘members entitled (0 vote at a meeting is the day precoding the day on which atire af the meet. ing is given, or, if no notice is given, the day of the meeting. NPCL Sec. 611(c)(1) ‘The designation and characteristics of each class, and the qualification and rights of, and limitations upon, the mem- bers of each class may be set forth in the certificate of incorporation, the by-laws, of if the by-laws so provide, a resolution of the board. NPCL Secs. 601(b), 616. (2) The voting powers of each class may be limited and defined by the by-laws or cer~ tificate of incorporation. In tact, the by- laws or certificate of incorporation may provide that members of a class shall not be entitled to vote at all. However, at least one class of members must have full voting rights. NPCL Secs. 612, 616. (5) ‘The quorum tor a class consists of sem bers entitled to cast a majority of the total number of votes entitled to be cast by the class. NPCL Sec. 608(a). A yuorum as low as members entitled to cast 10% of the votes may be established by the certif- Jeate of incorporation or by-laws. NPCL See. 608(b). A higher quorum may be es- tablished by the certificate of incorpora- tion oF a by-law uadupted! by dee members (NPCL Sec. 615(a)(1)), but this fact must be noted on any membership card or cer- fificate issucd. NPCL See. 615%). (4) The certificate of incorporation or the by- laws may specify the proportion of the ‘vote of the clase required to trancact hi ness. If they do not, a plurality is re- ‘quired for the election of directors and a majority for other corporate action. NPCL_ Sec, 616(b). A requirement for a greater proportion of the vote must be set forth either in the certificate of incorporation oF in a by-law adopted by the members, (NPCL Sec, 615(a)(2)) and must be noted ‘on any membership card or certificate is sued, NPCL Sec. 615(¢), M. The by-laws or certificate of incorporation may provide for cumulative voting. NPCL Sec. 617.OTHER BY-LAW PROVISIONS AUTHORIZED ‘Transfer of membership. NPCL See. 601(¢). Authorizing delegates. NPCL Sec. 0034U). Notice of adjoumed meetings. NPCL Sec. 605(b), Tispectins at micetings. NPCL See. 610. Infant members. NPCL Sec. 622. PART TWO: BOARDS OF DIRECTORS AND OFFICERS A ic The by-laws or certificate of incorporation may prescribe qualifications for directors, Except in the case of certain youth programs, directors must be at least 18 years old. NPCL Sec 01a) ‘The by-laws or certificate of incorporation may provide for directors to be elected or appointed at large, or by special sections of the member ship, or by virtue of their current or former of- fice in the corporation or in other public or private entities. NPCL Sec. 703(a) ‘The by-laws may fix the number of directors of the corporation. with a minimum number of three. In a corporation with members, the num- ber may also be fixed by action of the members or of the Board under the specific provisions of a by-law adopted by the members. IF no nun ber is fixed, the Board will have three dire tors. NPCL Sec. 702(a) The by-laws or certificate of incorporation shall state the manner of election or appointment of NPCL See. 703¢b). certificate may provide for election or appoint- ment of directors by special sections of the membership, and may authorize these sections to elect or appoint alternates to serve if the reg- lular director_must be absent from a Board meeting NPCI. Sec 703A) The by-laws or certificate of incorporation may specify the term of office of directors, which may not exceed five years, except in the case of those elected or appointed by virtue of their office or former office in the corporation or jother entity dirvetors The by laws or In the absence of a provision fixe HL (CHECKLIST FOR LAWYERS 19 ing the term of office, it shall be one year. NPCL Sec. 703(b). The certificate of incor- poration ara hyclaw adaptod hy the members may also provide for classification of directors so that terms will be staggered. NPCL Sec. 704. If the directors are classified. the torm shall not exceed a number of years equal to the number of classes. NPCL See. 703(b), The NPCL does not limit the number of terms a director may serve, but the by-laws may do Except as limited by NPCL Sec. 706(c) (cover. ing cumulative and class voting), directors may be removed for cause by the members or by the directors, provided there is a quorum of not Jess than a majority of the directors. NPCL. ‘Sec. 706(a). The by-laws or certificate of incor: poration may provide that any or all of the di rectors may be removed without cause by a vote of the members (NPCL Sec. 706(b)), sub- ect to the limitations set forth in NPCL' Sec, 706(c). The by-laws or certificate of incorporation may specify that vacancies on the Board of Direc tors may be filled by the members. Otherwise such vacancies may be filled by vote of a ma- jotity of the directors. NPCL See, 705(a). The by-laws may establish the time and place cof annual or regular mectings: if the by-laws are silent, the Board must establish the time and place. NPCL Sec. 710(b). Meetings of the Board may be held anywhere inside oF outside the state, unless the certificate of incorporation Jaws fix a particular place. NPCL Sec. (1) Notice need not be given if the time and place of regular meetings of the Board of Directors are tixed by the by-laws. How- ever, the by-laws may specify that notice of such meetings of the Board must be given. Notice always must be given for special meetings. NPCL Sec, 711(b). (2) The by-laws may prescribe what shall constitute notice of a meeting of the Board. NPCL Sec, 711(b). (3) The by-laws may provide that notice of any adjouament of ¢ uceting uf Ue20 L. Board to another time and place be given to directors not present at the time of the agjoumment, and (unless suet time and place was announced at the meeting) 10 other directors, NPCL Sec. 711(@). (4) The president or anuwer ufticer oF he corporation specified in the by-laws or de- termined by the Board is entitled to call a special Board meeting, If the corporation has no members, any director may call a special meeting upon written demand of rot less than one-fifth of the entire Board. NPCL Sec. 710(c), ‘The certificate of incorporation or by-laws may authorize the Board to take action even if one ‘or more members is participating by conference telephone. NPCL Sec. 708%) Unless prohibited by the by-laws ot cert of incorporation, the Board may take action without a meeting if it obtains the written con- sent of all members. NPCL Sec, 708(b). A majority of the entire Board constitutes a quorum. The by-laws or certificate of incor poration may fix a lesser quorum, but if the Board has fifteen or fewer members, the {quorum must be at least one third of the entire Board. If the Board has more than fifteen mem- bers, the quorum must be at least five members plus one additional member for every ten mam bers in excess of fifteen. NPCL Sec. 707. The certificate of incorporation or a by-law adopted hw the memhore may also establish a greater quorum. NPCL See. 709(a)(1) ‘The vote of a majority of the directors (assum- ing « quorum iy present) constitutes the act of the Board. NPCL Sec. 708(d). The certificate of incorporation or a by-law adopted by the members may require a greater proportion NPCL Sec. 709(a)(2) The by-laws or certificate of incorporation may ‘authorize the Board to designate an executive committee and other standing committees, each consisting of three or more directors. Such ‘committees shall have as much authority as the Board delegates to them, subject to the limita tions in this section, NPCL Sec. 712(a). The by-laws may also provide tor tne cfeation oF vu. we special committees of the Board or may author ize the Board to create them. NPCL Sec. 7126 ‘The Board must present at the annual membets" meeting a financial report verified by the presi dent and treasurer or by 2 majority of the direc: tots, oF certified by a public accountant. NPCL Sec. 51%a). If the corporation has no mem= bers, the president and treasurer must present such a report at the annual Board meeting, NPCL See. 51%) The by-laws may provide for a president, vice president, secretary and treasurer, and for any alditional officers. The certificate of incorpora tion or the by-laws may designate alternate les for these officers. NPCL Sec. 713. ‘The Board elects or appoints the officers unless the certificate of incorporation or a by-law adopted by the members authorizes the mem- bers to elect all officers or specified officers or authorizes the president to appoint some or all of the other officers, subject to approval by the Board, Any two offices may be held by the same person, except the offices of president ‘and secretary. NPCL Secs. 713(a), (b). The certificate or by-laws may provide that one or more officers shall be ex-officio members of the Board, with voting rights unless specified otherwise. NPCL. Sec. 713(a) All officers must be elected or appointed an- ually unless otherwise provided in the certifi- cate of incorporation or the by-laws. NPCL See. 713(¢). An otficer elected or appointed by tte Board may be removed by the Board with or without cause. An officer elected by the members or a class of members may be removed, with or without cause, only by the members or the class, but the Board may suspend for cause an bllicer’s auibirity to act. NPCL Sec. 714(a), The NPCL is silent on this issue. f. The by-laws may spell out the authority and responsibilities of the officers; otherwise the Board of Directors does so. NPCL Sec. 713),PART THREE: AMENDING THE BY- LAWS A. By-laws may be adopted, amended or repealed by the members. They may also be adopted. amended or repealed by the Board unless the certificate of incorporation or a by-law adopted by the members provides otherwise. NPCL Sec. 602(b). Any by-law adopted by the Board may be amended or repealed by the members and, unless the certificate of incorporation or a by- law adopted by the members provides other wise, any by-law adopted by the members may be amended or repealed by the Board. NPCL dee. OUZ(C), (CHECKLIST FoR LawyeRS 21 B. The adoption, amendment or repeal of a by-law provision increasing quorum requirements. for meetings af the memhore ar Raard of Dirsctors fr increasing beyond a majority the proportion of votes necessary to transact business. at a meeting of the members or Bose af Directors must be authorized at a meeting of the mem- bers by vote of two-thirds of the members or by a greater proportion if so provided by the certificate of incorporation or the by-laws. NPCL Sees. 615(2\(b), 709(b). If a corporation has no members, the adoption, amendment or repeal of a by-law increasing quorum and vot ing requirements must be authorized by vote of tworthirds of the entire Board, NPCL Sec 709¢e.