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Can we protect interests of initial directors

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Can we protect interests of initial directors

We are about to form a 501(c)(3) nonprofit corporation. Is there any way the initial Board of Directors can have all the powers, not only for 1-3 years but for as long as they wish to remain on the Board? Also there are four directors. How do we invest more powers in one or two of them? Do we write it in our Bylaws?

We have often talked about the “sole member corporation” to protect the interests of a founder who wishes to assure that he or she can pursue the vision of the organization as long as he or she wishes.  The same techniques can be used to protect a group of founders who want to assure that they can each remain on the board forever, and you will want to set up your governance structure in your original bylaws before you undertake activities. (See Ready Reference Pages: “Bylaws Function as ‘Constitution’ of Nonprofit Corporations” and “Sole Member Bylaws Can Protect Founder of Nonprofit”)

Your situation is a little different from the sole member situation because you may not all agree all the time.  You will have to decide whether you merely want to give yourselves lifetime membership on the board, or whether you want the powers of members for yourselves. If you become the sole members, you will have to decide whether members may act by majority vote, in which case one of you could be frozen out. You could require unanimous vote of all members in order to take action. You could create four classes of membership initially, each with the right to appoint a representative to the board. You should also think through how things will change if any of you wants to get out, or for some reason can no longer participate.

If you want to invest some of the founders with more power than the others, you can do it by creating different classes of members and/or directors and assigning different voting rights to each.  You need to consider whether you will permit new members or directors, and what their relative voting rights might be.  There are subtle changes in the power relationships depending on the structure you choose.

Whatever you do, you probably want to be sure that each of you is protected against an adverse change by requiring that any amendments to the articles or bylaws be approved by all of you who are still participating at the time of the change. You ought to get some help from an attorney who understands this stuff to write the exact language that will reduce the risk of unexpected difficulties later.

Tuesday, April 10, 2012


It might be legal to give some members more power than others, but I would be very reluctant to be an active board member if this were the situation. No matter how much time or money I gave, the set up is that I would always be a second class citizen. In addition to the legal issue about whether this is possible, is the issue of what kind of an organizational culture this creates. --C.W. via email

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