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May we have two separate sets of bylaws for members?

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May we have two separate sets of bylaws for members?

We have a nonprofit corporation with 200 "shareholders" that is trying to include a statement in the bylaws that no amendment would apply to certain specific people. That would indicate, in the event of any amendment, we would actually have two separate bylaws - - one for certain named individuals and another for the remaining majority. Is it legal to have two separate sets of bylaws?

First, while it is unusual to have “shareholders” of a nonprofit corporation, some states permit it and treat the shareholders essentially the same as “members” of the corporation.  They have voting and certain other rights, but no right to distribution of dividends or other direct economic benefits.  I will assume that your shareholders are merely members of the corporation.

Although bylaws and constituent powers are purely matters of state law, I am not aware of any state that allows different sets of bylaws for different segments of the organization.  It is not unusual to have different classes of members or directors, more often based on some objective criteria than being individually named, and to provide certain different rights or responsibilities for the different classes.  We use the form frequently to protect the interests of founding members, for example, protecting them from arbitrary removal and giving them veto power over at least certain amendments.  (See Ready Reference Page: “Bylaws Function as Constitution of Nonprofit Corporations”

But I have never heard of a bylaw amendment that said no future amendment would ever apply to specific people.  It would be hard to write, difficult to actually administer, and wouldn’t make much sense.  They would need to come up with a better statement what they want to achieve in order to figure out how – or if – it can be accommodated.  As you state the effort, it doesn’t sound like a particularly good idea.  

Tuesday, September 27, 2016

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