Model for Amending Governing Documents

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Model for Amending Governing Documents

Most churches amend their governing documents once every decade or so. It is a daunting task. Besides, many members of churches hate change. Most churches delay amending their governing documents until a crisis hits. During a crisis, it becomes even more difficult for members to consider changes to the governing documents. This is a situation where neglect and delay make it more difficult and expensive.

The first mistake most churches make is to amend only their bylaws. Bylaws are subject to the authority granted to the church by the Articles of Incorporation and the state nonprofit corporation act. If any bylaw provision is not allowed by the Articles of Incorporation or the state nonprofit corporation act, that bylaw provision is void. If the leadership of the church relies on that void provision, it is automatically a breach of their fiduciary duty to the church. For example, if a church’s Articles of Incorporation authorize a single class of members but bylaws create multiple classes of member, every member vote is void or voidable while multiple classes of members exist.

We include in the church’s governing documents the church’s Articles of Incorporation and Bylaws. The church should not amend their bylaws without also reviewing the church’s Articles of Incorporation and the state nonprofit corporation act. By coordinating the superior authorities with the amendments, the church can have a seamless set of governing documents.

Churches should review their governing documents at least every two to three years—and more frequently if the state legislature amends the state nonprofit corporation act. If a church keeps its governing documents updated every two to three years, then the amendments are easier for the members to accept than a totally rewritten set of governing documents every ten or fifteen years.

We prepare amended governing documents for about 25-30 churches a year and have been preparing amended governing documents for over twenty years. Further, we have prepared governing documents for over thirty Christian denominations or fellowships. Based on our experience, we have developed a model that works well.

Here is my suggested model:

  1. Appoint a small bylaws committee (typically five to seven individuals, including individuals not currently on the church governing board) to interact with your attorney. Governing documents are legal documents and must comply with federal and state laws. While the church has lots of flexibility, limits exist. This committee should work closely with your attorney. Often, the attorney will have model governing documents published by the State Bar or by the denominational authority.
  2. Do not copy anyone’s bylaws. The quality varies greatly and every state has its quirks. You can read them for ideas but never cut and paste. Since the governing documents must vary from state to state, and agree with the state nonprofit corporation act and the church’s Articles of Incorporation, your church’s bylaws are unique. Also, the bylaws must be internally consistent. Copying from someone else’s bylaws is a recipe for void provisions and potential disaster.
  3. The bylaws committee should focus on creating a narrative on how they believe that the church should be governed, especially from a Biblical perspective. The bylaws committee should review the current bylaws and draft bullet points for changes it would like to make. It should give the bullet points and the narrative to the attorney for drafting the governing documents. The state nonprofit corporation laws have great flexibility if the church properly takes advantage of that flexibility. A good nonprofit attorney will draft governing documents that will be faithful to a Biblical perspective and comply with the state nonprofit corporation law.
  4. Allow the attorney to draft the new proposed governing documents for the committee’s approval. Ask questions of the attorney. Require the attorney to explain why he or she drafted the governing documents to include certain provisions. Sometimes the attorney will respond that the provision is required by federal or state laws governing nonprofit corporations or tax-exempt corporations. Sometimes the attorney will respond that the provision reflects the law regardless of its inclusion in the bylaws. Sometimes the attorney will respond that the provision can be changed to satisfy the committee’s concerns.It may take two or three drafts for the attorney and committee to create a set of documents that can be approved.
  5. After the committee has approved a draft set of documents (Articles of Incorporation, bylaws, and mandatory policies), publish them to the church board for their input and comments. The committee should receive the board’s comments and discuss them with the church’s attorney.
  6. If appropriate, have the attorney revise the governing documents after receiving board input since all the documents are interrelated and dependent on each other. Present revised documents to the board for their approval. Without voting members, the process stops here.
  7. If your church has voting members, publish the governing documents to the members. I normally suggest that the drafts be posted on the church’s website for download. Then the bylaws committee should hold several open forums with members to receive their input and comments. The open forums must be scheduled so every member has the opportunity to participate. I usually suggest that the open forums be held over a two-week period.
  8. Have the bylaws committee meet again and review all the input and comments received from the members. Have the attorney revise the governing documents after receiving the member comments that are approved by the bylaws committee.
  9. Schedule a vote on the documents according to the church’s existing governing documents. The meeting should be noticed as required by the governing documents and state nonprofit corporation law. The notice of meeting should notify members that no discussion or floor amendments will be allowed at the meeting. The members should be able to approve or disapprove of the proposed governing documents as a package. If your state law and existing governing documents allow, some churches hold the meeting open for several days to allow all members to vote. Other churches have utilized electronic voting if that is available in your state and authorized by your current governing documents.

One last thought. Do not rush this process. It takes time for individuals to consider the proposed changes. Some will not like the proposed changes on an initial reading, but come around to supporting the changes after discussing it with church leadership and in the open forums. Do not let the process drag out. Normally, this process should take three to four months. It should never take over six months.

Following this process, we have yet to have a failure to adopt the new governing documents. One 9,000 voting member church had 97% approval, with over 6,000 members voting. Your church can do it. Delay no longer nor wait until a crisis arises. If you get your house in order during periods of relative calm, the crisis periods are a lot easier to handle and are usually shorter.

 

By | 2014-11-05T18:18:52+00:00 November 5th, 2014|Governance, Legal|

About the Author:

Frank Sommerville
Frank Sommerville is a shareholder in the law firm of Weycer, Kaplan, Pulaski & Zuber, P.C. in Houston and Dallas, Texas. His law degree is from the University of Houston Law Center. He holds a license as a Certified Public Accountant. He is also Board Certified in Tax Law by the Texas Board of Legal Specialization. He is rated AV (highest possible) by Martindale-Hubbell Legal Directory. Mr. Sommerville has served nonprofit institutions of all sizes as a bookkeeper, accountant, auditor, tax advisor and advocate, litigator and legal advisor. He has presented seminars on nonprofit taxation since 1981. He regularly assists churches in preventing litigation, including those that originate with accusations of sexual misconduct. In 2005, 2006 and 2007, The Church Report, a magazine serving larger churches, named Mr. Sommerville as one of the 50 most influential Christians in America. He is one of the contributing authors to PPC’s Nonprofit Tax & Governance Guide: Helping Organizations Comply (2011). He is a regular contributor to many publications, including Christianity Today and Your Church. He is a member of the Experts Panel for ChurchSafety.com and posts answers regularly. He has written more than sixty articles on nonprofit issues, most of which are available at www.wkpz.com. Mr. Sommerville is also part of the WKPZ team that assists with employment and ERISA issues. He has represented nonprofit and religious organizations in disputes with former employees regarding benefit plans, retirement plans, and termination including employee discipline. He counsels nonprofit and religious organizations regarding compensation planning, employee handbooks, employment policies, employment agreements, intellectual property policies and proper treatment of clergy and rabbis.