BACKGROUND

In 2013, New York passed a sweeping set of legal reforms governing the actions of the boards of New York State’s private nonprofits. The law, known as the Nonprofit Revitalization Act, was designed in part to streamline and modernize New York State’s Not for Profit Corporation Law, including:

provisions for electronic submissions of audit
electronic voting and meetings held remotely by nonprofit boards, and
reducing the number of classifications of nonprofits in the state.

The law also increased the requirements being placed on New York’s nonprofit boards to ensure ethical standards of behavior, including provisions related to Conflicts of Interest and Whistleblower Protection, that are correlates to components of the Sarbanes-Oxley Act governing the boards of publicly-traded corporations. New York’s Nonprofit Revitalization Act represented a new high-water mark in terms of regulation of nonprofit boards – and provided legal weight behind what are widely considered to be best practices for nonprofit boards. It also raised the stakes on the questions outlined above, moving many to question the degree to which their own state’s laws measured up to NY’s Nonprofit Revitalization Act. Meanwhile, from the perspective of BoardEffect, it was critical to understand the ways in which state laws might impact how our clients could legally utilize board portals to support the work of their boards. In other words, in what ways do state laws impact usage of software like BoardEffect for nonprofit boards?

RESEARCH APPROACH

In 2013, the state of New York significantly revised the set of laws governing its nonprofits.  This prompted us to review those changes and begin contemplating the implications of the NYS Nonprofit Revitalization Act on other states.  Subsequently, BoardEffect decided to research the way in which every state in the U.S. governs board actions.

To do so, BoardEffect conducted an exhaustive review of the current legal codes governing private, nonprofit boards on a state by state basis. However, this was not an exhaustive review of all laws relating to nonprofits.  Rather, this review was confined to the activities of boards that we believed to be reasonably supported by the functions of board portal technology. To establish this benchmark, we turned to the BoardEffect Product Framework, which drives how the BoardEffect solution is developed.

BoardEffect Product Framework

Board Cycle

Specifically, the work of boards is complex, demanding, and high-stakes. It is also cyclical in nature. Boards convene on a regular meeting cycle, deliver on a recurring set of annual responsibilities, and continuously work to refresh and strengthen themselves as strategic assets to the organizations they serve. These activities occur within three different operating cycles, each with its own pace and components. BoardEffect’s product vision and corresponding feature roadmap are driven by boards’ responsibilities across these demanding, interdependent, and mission critical cycles.  Moreover, this framework and BoardEffect’s product capabilities can be leveraged to manage the topics addressed in this study as follows:

Nonprofit Laws Topic Areas

Board Cycle Nonprofit laws

As we did in our first report on “U.S. Laws Governing Electronic Voting by Nonprofit Boards,” our first step was to connect with the offices in each state responsible for regulating charities. Thankfully, many states have improved online access to their legal codes and provisions a great deal since our first report in 2012. Most of the data presented in this study was collected simply by visiting each state’s website and locating the most current laws governing nonprofit corporations. However, when that was not possible, or when we were not able to clearly identify how current the information available online might be, we reached out directly to the state offices for guidance.

AUTHORS

Dottie Schindlinger

EVP / Governance Technology Evangelist

Isabelle Clérié

Research Consultant

STUDY BRIEF

Download the Nonprofit Laws: Board Rules and Regulations Study Brief to share with anyone involved in supporting the work of nonprofit organizations.

DEFINITIONS OF TERMS USED IN THIS STUDY

We chose the following 13 topic areas to survey in the Study because we believe these board activities are reasonably supported by the functions of board portal technology.  For a detailed look at how we define these terms, see below.

Actions refer to votes or any decision that requires the input of the full board.

Refers to the actions of board members that have a material interest – whether direct or indirect – in an issue being decided by the board.  An example of a conflict of interest might be a board member who is a senior officer of a company with which the nonprofit is considering doing business.

Refers to the way new board members are selected/approved to serve a term on the board.

Refers to the use of technology other than hard-copy mail used in board communications, including meeting notice, voting, approvals, and other common board communications.

Refers to the physical/virtual location where regular and special board meetings may occur.

Refers to the requirement of organizations to alert board members in advance of the date, time, and location for a board meeting.  The provisions in Notice of Meeting and Waiver of Notice also define what constitutes “notice.”

Establishes the minimum number of voting members that must be present at a meeting in order for a vote to occur.

Refers to the termination – by the organization – of a board member’s service on the board.

Refers to legal provisions requiring nonprofit boards members to reside in the same state where the nonprofit is incorporated.

Refers to the termination – by the board member – of the board member’s service on the board.

Refers to the number of years a board member serves in a single term, and any provisions in the state code to limit the number of terms (consecutive or non-consecutive) a member may serve.

Refers to a seat on the board – as outlined in the organization’s bylaws – that is not currently filled by a member.  The vacancy could occur due to resignation, removal, or attrition.

Refers to the rights of board members to “waive” their right to be notified in advance of board meetings, and to the conditions under which an organization would not need to provide advance notice of a board meeting.

DISCLAIMER

This study represents a compilation to the best of our ability of the information available through public records on U.S. state laws concerning electronic voting and other areas of responsibility of nonprofit boards. The information contained in this study does not represent legal advice of any kind and should not be used in lieu of legal counsel. This study does not supersede any organization’s own bylaws; nor does it supersede any current local, state or federal laws in the U.S., nor laws of any countries outside the U.S. In addition, due to the constantly changing nature of online records, we cannot guarantee that the links to related websites listed are current.

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