Can the founding board (5 people) form a nonprofit where we cannot be voted out - therefore functioning much like a sole member? We also have 3 additional board members who were appointed but will go through elections. We were just told we could not have this provision in our bylaws but we all 5 want this. We have done all the work forming this group.
I don’t see why not. You could structure the organization as a membership organization with the five founders as the only members. Then you could select and remove the other board members as you wish. You could also include a provision in the bylaws that the founders could not be removed either as members or directors. That way you would have greater tenure if you ever want to admit other members of the corporation. (See Ready Reference Page: “Sole Member Bylaws Can Protect Founder of Nonprofit”)
Your bigger issue is how you will resolve disputes if they ever arise among the five founders. Do you want to require unanimous vote for any action? Do you want to require four votes for an action, including removal, so that one of you can gang up on the outcast? Do you want to work by majority vote? If you admit additional members, do you want to require unanimity or a super majority of the founders to take membership action? Or board action? There aren’t necessarily easy answers to these questions, but it is best to try to figure them out now while you are all still on good terms with each other. It may be more difficult later if there is a dispute.
If you already have additional directors and have not changed the structure, you may have a hard time convincing them to go along with your revision, although you may have the votes to out-vote them. Once people have power, it is very difficult to get them to give it up.
Wednesday, June 25, 2014
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