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Must nonprofit be open and transparent about membership?

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Must nonprofit be open and transparent about membership?

Does a nonprofit have to be open, honest and transparent about its criteria for membership? If a nonprofit terminates an individual membership is it obligated to give that member clear reasons for the termination that fit with this criteria?  

A nonprofit does not legally have to be open, honest or transparent about its criteria for membership (think about selective fraternities or sororities at colleges), but it does have to follow the law.  A nonprofit corporation’s bylaws may establish criteria for membership but many forms will provide that membership can be denied for any reason.  (See Ready Reference Page: “Bylaws Function as ‘Constitution’ of Nonprofit Corporations”)  With the possible exception of a trade association where denial might constitute an antitrust violation or one so open that it is considered a public accommodation, from the point of view of the nonprofit, it can probably get away with pretty arbitrary criteria.

More important, however, are the termination provisions because they are used to deny individuals rights to which they have become entitled by admission to membership.  Courts will not usually become involved in the internal disputes of associations when the associations have followed some form of due process in terminating a member.  The process is usually more important than the reason, which is why we call for a form of review and an opportunity to be heard before the removal of a member in our standard form bylaws.  (See Ready Reference Page: “Bylaws Function as ‘Constitution’ of Nonprofit Corporations”)  If the organization follows a fair procedure and gets the requisite votes, it can probably be as miserable as it wants.

Monday, October 10, 2016

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