The board should review organizational and governing instruments no less frequently than every five years.
-
Introduction
Regular reviews of the organization’s articles of incorporation, bylaws and other governing instruments help boards ensure that the organization is abiding by the rules it has set for itself and determine whether changes need to be made to those instruments. The board may choose to delegate some of this deliberation to a committee, but the full board should consider and act upon the committee’s recommendations.
-
more...
Most state laws permit the state attorney general to file suit asking the court to hold a board
accountable for failure to abide by the requirements set forth in these basic documents. If it
becomes impractical or no longer feasible to carry out the purposes of the organization as outlined in its articles of incorporation, the board should take appropriate action to amend the articles and to file the amended articles with state officials, as required. In some instances, a charitable organization may need court approval to amend its organizing documents.
-
-
Core Concepts
- As the organization evolves, articles of incorporation, bylaws, and other governing instruments should be reviewed and may need to be updated.
-
Legal and Compliance Issues
- The IRS needs to be informed if major governance instruments or policies change. This is easiest to do with an attachment to the IRS Form 990.
- The state needs to be informed if changes affect the articles of incorporation. Some states also require organizations registered in their state to file amended governance instruments.
- State attorneys general have the ability to file a suit if requirements outlined in governing documents are not followed.
- If the purpose of the organization has changed and it no longer follows the articles of incorporation, the articles should be amended and re-filed. The organization also needs to notify the IRS to ensure that the changes do not affect the organization’s tax-exempt status.
-
Legal Background
Each organization’s articles of incorporation and governing instruments set forth the requirements for its conduct and that of its board of directors. Charitable organizations are required to submit these articles and instruments to the Internal Revenue Service when applying for recognition as a 501(c)(3) exempt organization. If an organization amends its governing instruments, it must provide the revised documents to the appropriate Exempt
Organization office or attach them to the next annual information return (Form 990, 990-EZ, or
990-PF) it files with the IRS.1(From The Principles for Good Governance and Ethical Practice: Reference Edition,
Published in 2007)1 IRS Publication 557, Tax-Exempt Status for Your Organization,page 16. -
Discussion Points
These questions – from the Principles Workbook (PDF) – are intended to prompt discussion about the principle, assess the polices and practices of your organization, and encourage your organization to take steps to identify where improvements should be made.
- Organizational and governance instruments are intended to guide and inform the board. Do we have access to pertinent documents to aid decision making?
- Do we take responsibility for amending our governing documents in a timely manner to avoid putting the organization at risk for noncompliance?
- Who typically takes responsibility for maintaining the schedule for reviewing bylaws and other governing documents?
-
Resources for Principle #18
-
Related Principles
-
Supplemental Materials
