5 Big Bylaw Blunders (Try Saying That 3 Times)
As I look forward to a weekend of Bylaw reading and revisions, I started thinking about some of the mistakes I see. They range depending on the organization’s size, field and expertise of its ED. But I almost always see one of these:
1. The purpose in the Bylaws doesn’t match the purpose outlined in the formation document (the Articles, Certificate of Formation, etc.) Which could be a problem if your State resolves this by making the Articles the winner. It’s also your first indication that there might be an identity/branding problem.
2. Not being specific with thresholds. If a majority is required to pass a vote, is it a simple majority? Or do you mean a 2/3rd’s majority? And if it’s a simple majority of the “Board,” are you referring to the total number of members allowed? Or the total number of board members seated? This might seem nit-picky, but I’ve been a part of my share of board meetings where everyone sat there confused trying to figure this out mid-vote.
3. Lack of thoughtfulness. There are soooooooo (*breath*) ooooooo many Bylaw templates out there. That now the tendency is to pick two or three, throw em’ together and, Voila. What doesn’t happen is a thoughtful conversation by the Board around how IT would like the organization to run. How do I know this happens? I ask someone about their decision to include an ex officio position, and they ask me what that is. Bylaws are only as effective as they are accurate.
4. Not including mandatory language. I’m seeing this more and more, which is a real problem. The IRS requires organizations include specific language in its formation documents before applying for federal tax exemption. Forget to do it, and it’s to the back of the line for you. Similarly, some States (like California) require specific language too. Which is why it’s important to get your team together or work with someone on drafting these.
5. Not enough details in the dissolution section. Sure, a “meh” dissolution provision will get you by for federal tax exemption. But it will make you cringe if you ever have to use it. Remember, the intention of Bylaws is to be instructive. So by reading my dissolution section I should know who I can give assets to, how, when and what the requirements are or process is. Anything less than that is going to be a nightmare to implement.
6. Keeping in Legacy structures. I’m all for respecting the past, but to a certain degree and never in my legal documents. Every time the Bylaws are looked at they should be questioned. Does everything still apply? Do they still serve the organization? If not, take em’ out in the next amendment.
After seeing so many struggle with drafting their Bylaws I’ve decided to host a workshop. So if you’re starting your own organization, in the middle of drafting bylaws or want to refresh the Bylaws you have then consider attending my workshop on the 28th. I’m limiting attendance to 10 people so don’t delay!
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