Drafting the Non profit organization’s by-laws
The by-laws (also called ‘bye’-laws) of a non profit organization lays down the broad policies and framework for conducting of its day to day activites and thus deserves special attention when starting a non profit organization. The by-laws cannot be changed except under exceptional circumstances by passing of the amendments by a majority of board members. Moreover changes in by laws are also arise questions from authorities,thus making it even more important to draft it correctly the very first time. You can download a sample by-law from this website which incorporates most of the desired features. However while a large section of the by-law can be replicated verbatim, a few sections merit personal attention. These sections are listed down below –
1) The membership criteria – This section outlines the rules for admission of members, qualifications required to become a member, membership fees, rights and duties of members, voting rights of members and its procedure,membership fees etc. This section is most important because its the quality of members that eventually decides the success or failure of an organization. It is very important that the rules of this section are so laid down that they assist in maintaining control over the functioning of organization.
2) The clause of Indeminity – This is the clause that defines the personal liability of board members. This section needs to be carefully drafted clearly defining the situation in which the indemnity would apply.
3) The board functioning – The functioning of the board is determined by several factors like the minimum and the maximum number of allowed board members, voting rules, the quorum of qualifying meetings, the rules for conveying general and extra ordinary meetings, the rules for passing resolutions, the rules for proxy attendance in meetings, the documentation process of the organization, the terms and the tenure of the board, the rules for re-election, the designations and responsibilites of the sub comittees of the board, the policy for conflicts in interests, the procedures for removal of members and the retirement ploicy of the organization.
These rules in turn decide the way the day to day business is conducted in the organization. They also help remove ambiguities from the processes.
4) Compensation policies – Most of the states prohibit direct compensation to any of the board members. The members may be reimbursed expenses incurred by them toward execution of programs for the organization. The reimnursement policy should thus be laid down in the most detailed manner.
When drafting these rules, it is necesarry to assess the pros and cons of various possibilites before finailizing them.After finalizing the terms, a good idea would be to enegage the services of a local lawyer who would then look through each of the sections to amend or modify terms that might be in conflict with the local laws of your state.