Hello, this is Eliza Kragh here today with Mark Apodaca, who is an expert Professional Registered Parliamentarian.
We have an exciting topic to discuss today and will cover governance documents.
Hi Mark, thank you for your time. Please share about governance documents today.
I will be showing a triangle and will name each part of it, then take it down and discuss it in detail.
Beautiful!
These documents apply to corporations, non-profits, partnership businesses, and some government entities and universities.
They all have governance documents.
For today, I am focusing specifically on non-profit organizations.
First, you can see the top of the pyramid.
Laws or statutes - state level.
Next is Articles of Incorporation,
then Bylaws,
Special Rules of Order, Rules of Order, Standing Rules, and Policies and Procedures,
and last one on the bottom are Customs.
Laws at the top are the most important and have the highest authority.
I'm going to stop sharing now.
Okay.
Every state has its own non-profit laws.
They are not the same and they're all different.
What is New Mexico state law for non-profits is not the same as MN or MT or KS.
Each has their own with their own legislative passing laws.
These are the most authoritative laws.
The second one is the Articles of Incorporation.
If you want to set up a 501(c)(3) non-profit organization, you must file Articles of Incorporation with the Secretary of State.
Most states around the country require it to be filed with the Secretary of State, but some have exceptions.
In the Articles of Incorporation, you identify the name of the organization, the mission and purpose, and who the directors of the organization are.
Most of the time you will name three directors.
Directors do not have to be president or vice president.
Directors can be anyone.
An important point when filing Articles of Incorporation: you must have a paragraph with specific IRS clauses.
The reason is when you file a 501(c)(3) application, the IRS requires a copy of the AOI and bylaws.
If it does not show two important clauses, then the IRS will not accept your application for 501(c)(3).
So make sure to include these clauses.
Often times, the state will give a template to fill out, but that is not good enough
because many people use that template, submit it, and get denied because it doesn't include what the IRS requires.
So when you file AOI, make sure those clauses are included.
With the AOI, you send it to the Secretary of State who will check to see if the AOI and state law are in compliance with no contradictions between them.
If the Secretary of State finds that a clause conflicts with state law,
they will deny and send it back saying they do not accept it because the state law says otherwise.
This means you need to change that and ensure nothing conflicts with state law to get approval.
So AOI is the second highest authority under state law.
The third one is Bylaws.
The Bylaws cannot conflict with the AOI and cannot conflict with the state law either.
The fourth one is Special Rules of Order.
I will give you one good example.
You go to a business meeting as a member and someone makes a motion, it's seconded, and debate is open.
Each person can debate for 10 minutes.
10 minutes, two times.
That means I can debate in support, then someone debates against, and each time is 10 minutes.
If no one else new wants to speak in support, then the same person can speak again a second time for 10 minutes.
Suppose you had 200 members in a meeting and each has 10 minutes...
Meeting drags on.
It drags on all night and all day.
So Special Rules of Order must be passed by the members.
If you want to limit debate to 3 minutes per person, one time each for support and against, alternating, and then call for a vote...
That is called Special Rules because it will override Robert's Rules of Order.
If you do not have that, then you follow RONR.
Then the next authority we have is Rules of Order.
That can be Robert's Rules of Order, Newly Revised.
12th edition.
12th edition,
which is this book.
If your bylaws state that RONR is your parliamentary authority, then you need to follow the book.
Some organizations, though not many, use a different book.
Standard Code of Parliamentary Procedure.
Other organizations use different parliamentary authorities.
Yes, this is from the American Institute of Parliamentarians.
That is different from the National Association of Parliamentarians.
Many parliamentarians know both books.
I am a member of both organizations.
Some parliamentarians are certified in both.
Again, the parliamentarian gets a copy of the bylaws and reads it,
and if it states RONR, they follow it.
If it states AIP with the Standard Code of Parliamentary Procedure, then you follow that.
Sometimes organizations will use the Standard Code for Rules of Order that will supersede RONR, which can happen.
The next one is Standing Rules, Policies, and Procedures,
investment policies, finance policy, etc.
At that level, do not put them in the bylaws.
The bylaws explain the structure of the organization.
Policies and procedures need to be separate documents.
The last one is Customs.
It is something that has been used for many years.
But again, if you go to a business meeting and find a custom that conflicts with RONR,
RONR beats customs and you must follow RONR,
except sometimes people will elevate customs into Special Rules of Order.
It happens.
I want to clarify.
Your bylaws are a legal document - a legal document.
I've been in court where a judge asks me to be an expert witness.
I have to explain what the bylaws say and interpret them so the judge can see all perspectives because it is a legal document.
Another good example related to the triangle:
One organization established in their AOI that they would have members,
then when they created their bylaws, they also included members, just like the AOI.
Years later, the board decided they did not want members anymore.
So they amended the bylaws and removed members, but the AOI was never amended.
So they were in conflict.
That caused a conflict.
Some members notified me that this couldn't be done because they never voted on removing members.
I asked to see the minutes.
That is why minutes are very important because they are a legal document too.
They could not provide me with any minutes.
There was no record of members voting and approving the removal of members.
That means the AOI was more authoritative than the bylaws,
which means the organization had to revert to having members because there was no record in the minutes that members voted and approved the change.
Again, if it is not in the meeting minutes, then it never happened.
Right.
That is the bottom line.
It is important that members of any organization, whether a state agency or an affiliate,
understand these important governance documents.
Another interesting example is when COVID happened, which had a significant impact.
I went to an annual meeting for an organization and was approached about whether their Zoom meeting was valid.
Why?
Because their bylaws were silent about having meetings through video conferencing.
But their state law already allowed it.
They had included this provision before COVID, so the meeting was legally permitted.
Another state did not have it in their laws.
Robert's Rules of Order states that if video conferencing is not in the bylaws, you cannot have one.
It must be in the bylaws, so many legislators across the US started adding amendments to their state laws to include video conferencing.
So they could proceed with their meetings.
But that one state already had it in there before COVID.
There are variations in how to approach this. When I'm asked to serve as parliamentarian,
I have to find out which state the organization is incorporated in,
and if they provide that information, I will look up the non-profit laws in that state to read them.
I will ask for a copy of the AOI, though many organizations don't keep a copy.
That is an important document.
If I receive these documents, I will review them to see if there are any conflicts.
I review the bylaws, review any other rules, standing rules, etc.
I must see the whole picture before my assignment to work as a parliamentarian.
All governance documents should be there, minutes too.
I make sure everything is available and check if there's anything from previous business meetings that must be added to the bylaws.
I've encountered one or two organizations that did not keep good meeting minutes.
There were many amendments to the bylaws going back 10 or 12 years, but no record in the minutes.
That means the current bylaws are void because there is no record of the amendments in the minutes.
You have to go back to the bylaws from 12 years ago and follow those.
I have seen many organizations that don't realize the importance of these valuable documents.
So that is my message about these documents.
I would appreciate some clarification. Now that you've mentioned each state needs to review their state laws,
one good example would be that each state determines how often a non-profit must host a business meeting.
Some require meetings every year, some every two years.
Is that why it's important to review the state laws?
Yes, if your state law says you must have an annual meeting, that means every year.
If you do not follow that, you are breaking the law.
Okay.
But if your state law says it's left up to the organization to decide depending on their bylaws,
then the bylaws can state every two years and that's acceptable.
But if state law clearly states that an annual meeting means every year, you need to call for a meeting annually.
Okay. So again, that's why it's important to review the laws.
Now with AOI, you mentioned that it's really important to include the mission of the organization,
IRS information...
Clauses.
Clauses must be in there.
The specific code.
And must have a board of directors. All that information needs to be included in the AOI. Is that correct?
In the past, they would name the positions of board members.
Now that's not the case anymore; it's in the bylaws.
So if your state law says you must have the president, vice president, secretary, and treasurer, then it's required.
If your bylaws have president, vice president, and secretary/treasurer combined,
the AOI and bylaws are in conflict.
Conflict.
because there are two separate positions in AOI and it's one position in the bylaws.
Today's AOI would not typically include the positions.
In the past they did, but not anymore,
at least in the states I've worked with.
But it is important to include the IRS clauses.
I used a template the first time, sent it to the Secretary of State, and it was approved with no problems.
I got copies of the bylaws and AOI, sent them to the IRS for their review and approval for 501(c)(3).
They did not accept it and said I must insert specific clauses, so I added them to the AOI.
I sent it back and it was approved.
Okay.
Just put in the IRS code.
When an organization wants to approve AOI, what kind of vote is required for that to happen?
AOI?
(Nods in affirmation)
I have experienced two different approaches.
One way is a group gets together and they want to establish a non-profit organization.
They vote as a group, of course, by majority.
Normally all agree that they want the organization.
Then once they all agree, vote, and pass, they fill out the AOI application to submit it.
The other approach that I have seen is when an organization
finds three people that want to establish a non-profit.
Those three, since state law requires three.
So they apply for AOI with their three names, get approved, and announce to the community that they've established a new non-profit and will have a general meeting.
The purpose is to develop the mission, vision, values, and bylaws together.
People that want to join become members, pay dues, and start forward progress. Then that group develops everything with the bylaws.
Then you have everything you need to send to the IRS to submit for 501(c)(3).
So I have seen both approaches.
Either way.
What if the organization wants to amend their AOI? What kind of vote is required for that process?
Two-thirds (2/3).
With previous notice?
Previous notice with 2/3 or majority of the whole membership.
Either one of those.
If you amend the AOI, you have to amend the bylaws if necessary.
Because they cannot conflict.
Both.
Okay, so now the next document are the bylaws.
The bylaws will explain the structure of the organization, and expand on the responsibilities and duties of each board position.
For the bylaws, what is the voting process to accept them?
For the first time or to amend?
For the first time and then to amend.
For the first time, it will be majority of the votes.
Then to amend is two-thirds unless your bylaws say otherwise.
One organization required eighty (80) percent approval to amend.
Another organization required one hundred (100) percent, which means if one person voted against it, the whole proposal fails.
Normally two-thirds (2/3) according to Robert's Rules of Order is required to amend.
At the beginning, the members review it which requires majority, and then later change it to two-thirds (2/3).
You're right that the bylaws explain the structure, the responsibilities of the board and officers.
Some bylaws, for example, will list the specific duties for the role of Secretary and that's it.
Some organizations have a list in bylaws but need to go to the policies for a detailed list of responsibilities.
So the policy is separate from the bylaws.
The function and responsibilities of the Secretary in the bylaws might state to pass out the minutes,
keep a record of the names of all the members,
and to make sure that the minutes be posted on the web or distributed to all members.
If your bylaws say the minutes need to be sent by mail to all members,
then if you post on the web and not send it out, you violate the bylaws.
So the clause in the bylaws must be specific, like "the minutes will be posted on the web within 10 days after the board meeting."
It must be specific and not broad.
I have seen many bylaws that are very vague and they cause a lot of problems and mistakes in interpretation.
I have seen some bylaws with 30 to 40 pages with many of them mixing policy and procedures together.
You want to separate them, as shown in the triangle with the bylaws, and move policies down to their proper level.
Another important thing to include in the bylaws would be the membership dues - how much it costs?
And also, if the members want to amend the membership dues, that requires a two-thirds (2/3) vote?
Bylaws, again, define the structure, with different categories:
regular members, senior citizens, hearing members, and so on - all those categories.
The fees and dues are in the standing rules.
In the standing rules and not in the bylaws?
No, the standing rules will list them.
I look at the National Association of Parliamentarians and their bylaws are silent on dues.
The standing rules will have it since the board themselves can adjust the dues.
So if during a business meeting, a motion to increase the dues by $5 is passed, it will go into the standing rules and modify it.
The bylaws stay the same.
That is a very common thing that I've noticed in various state associations - their bylaws include their member dues.
So that was good to clarify.
It says they will pay their member dues, but how much is in the standing rules.
Thank you for the clarification.
You also mentioned that if you want to vote electronically, you must include that in the bylaws itself.
If it is not in the bylaws, then you cannot.
Paper voting by ballot ensures privacy so people will not know who voted for what.
If the bylaws state you must use ballots, you