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What do we have to do to keep organization alive?

Your Legal Questions Answered

What do we have to do to keep organization alive?

I have had to temporarily suspend my small 501(c)(3) corporation's operations (except for our online material that is still online), and I'm wondering how much of the internal operations we still need to conduct for legal purposes - e.g. things like officer elections and board approval of the budget, which is now essentially nonexistent. I'm still doing all the external filings required by the state government, but there isn't anything for the board to discuss or approve, or any need to elect new officers.  What are we legally obligated to do until the organization is back to normal?

This is a question of state law, but most nonprofit corporation laws require certain formalities, like an annual meeting, elections, and compliance with bylaws.  If no one objects, however, there is probably no immediate consequence for failure.  Most nonprofit corporation laws provide, for example, that officers and directors hold their offices until their successors are selected, so failure to hold a new election simply keeps the incumbents in office until something happens later.  A dissenting director (or member if you have members with the right to vote) could probably compel the organization to take formal action on an annual meeting and elections, but you could comply relatively easily if pushed, and ordinarily would have time to do so without penalty.  As long as you are complying with federal and state reporting requirements, no governmental entity is likely to take any adverse action against you.

If you want to keep your officers and directors interested in the organization and willing to participate when you are “back to normal,” it probably makes sense to give them regular updates on the situation and to go through with the formalities of elections and approving a budget.  They might have some ideas on getting back into operation.  If they forget that the organization exists and that they have responsibilities, they may decide that they don’t really need the aggravation and won’t be there when you need them.

Tuesday, September 8, 2020

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