Board Basics: Calling and Conducting Nonprofit Board Meetings

JASON QU, MANAGING AT TORNEY

NONPROFIT & SMALL BUSINESS LEGAL ASSISTANCE PROGRAMS

D.C. BAR PRO BONO CENTER

DECEMBER 18, 2018

D.C. Bar Pro Bono Center – Nonprofit Programs

➢ We match nonprofit organizations with pro bono legal counsel.▪ Pro bono attorneys assist with many different types of legal matters including

corporate governance, IRS compliance, employment law, and real estate matters.

➢ We host in-person legal clinics to address specific issue areas (e.g. governance policies, risk management, intellectual property)

➢ We sponsor trainings, webinars, and podcasts on important, real-world legal issues facing nonprofits.

➢ We provide written resources and archived training sessions on our website: www.lawhelp.org/dc/ced

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“Board Basics” Webinar Series

Other topics in the “Board Basics” series include:

▪ Taking Minutes

▪ How to Vote, & Other Board Actions

▪ Meeting in Executive Session

▪ Forming & Using Executive Committees

▪ Forming & Using Board Committees / Advisory Committees

▪ Managing Conflicts of Interest

Today’s Webinar

We’ll cover rules & best practices re: board meetings for D.C. Nonprofits:

➢ How often should you hold board meetings?

➢ Who can call a board meeting?

➢ Do you have to give notice of the meeting, and what is proper notice?

➢ Do you have to hold open meetings and let non-directors participate?

➢ How can you prepare for a board meeting?

➢ How do you conduct a board meeting?

NB – Today’s webinar does not cover membership meetings, only board meetings; if your nonprofit has members, additional requirements will apply

Your Governing Documents Control

➢ DC Nonprofit Code contains default provisions re: how nonprofits should call/conduct board meetings

▪ If your bylaws are silent on these issues, then the Nonprofit Code’s default rules apply

▪ However, the Code often allows nonprofits to adopt alternative rules in their Articles and Bylaws – sometimes with certain limitations/thresholds

➢ Today’s webinar will focus on the Code’s default rules – check your Articles & Bylaws to see if your organization has adopted alternative requirements

▪ If so, flag for further review – are alternative rules allowed the Code? Are they workable/desirable for the organization?

Legal Background: Fiduciary Duties of Nonprofit Directors➢ Under D.C. law, nonprofit directors are fiduciaries of the nonprofit

organizations they serve

▪ Meaning: Directors owe a heightened legal duty of care and loyalty to their organization

➢ Duty of Care: Directors should act in good faith and in a way that they reasonably believe is in the best interest of the nonprofit; directors should stay informed; directors should exercise independent judgment

➢ To exercise their duty of care, directors must meet regularly as a group to discuss the affairs of the organization and take necessary votes/actions

How Often Should the Board Meet?

There’s no one-size-fits-all answer.

➢ Frequency of meetings will depend on the needs of your organization

➢ Must meet often enough to keep directors informed and engaged

➢ Also, the board must meet in order to vote on pending corporate actions

➢ Existence of board committees (e.g. executive committee) may allow the board to act in between full-board meetings

➢ Bylaws may already specify frequency of meetings, and/or set specific dates for meetings (e.g. annual meeting)

How Often Should the Board Meet?

➢ The board can hold two types of meetings:

▪ Regular meetings

o Held at regular intervals and scheduled in advance by the

board and/or governing documents (for example, monthly

or quarterly meetings; annual meetings)

▪ Special meetings

o Non-regularly scheduled meetings of the board

Who Can Call a Board Meeting?➢ Regular meetings may be set by the organization’s governing documents

or by a resolution of the board (e.g., at the beginning of the calendar year) – do not need to be called individually

➢ Per D.C. Nonprofit Code, special meetings can be called by:▪ The chair of the board;

▪ A resolution of the board;

▪ The highest ranking officer of the corporation; or

▪ 20% of the directors in office.

➢ Your Articles/Bylaws may provide for alternative procedures re: special meetings▪ E.g., any 2 directors can call a special meeting

Notice of Meetings

➢ Per the Nonprofit Code, a nonprofit must give directors notice of

board meetings

➢ As a practical matter, actions & votes taken at a meeting might be

questioned/deemed invalid if proper notice was not given to all

directors

Notice of Meetings➢ Regular meetings:

▪ Separate notice is not required for each meeting. One notice at the beginning of the year with the date, time, and place of all regularly scheduled meetings for the year is sufficient.

▪ Ex: Board will meet at 5 PM at the nonprofit’s offices on the first Monday of the month

➢ Special meetings:

▪ Unless the nonprofit’s bylaws provide for a shorter or longer period, the nonprofit must provide at least two days’ notice of a special meeting

How to Give Proper Notice➢ Nonprofit Code default rule: a nonprofit must provide notice in the “form of a

record”

➢ There are two forms of notice that meet this requirement:1. Tangible methods that create a physical document, such as letters and faxes; 2. Electronic methods that can be saved and retrieved in a perceivable form, such as

email, text messages, and voicemail

➢ Oral notice (in person, over telephone) would not be proper notice because they do not create a copy of the message that the recipient can retrieve and review later

▪ However, your articles of incorporation or bylaws may affirmatively authorize oral notice

How to Give Proper Notice➢ How do we know if we’ve provided notice in the required timeframe? (e.g. 2 days)

➢ Tangible notice to a director is considered “effective” on the earliest of: ▪ When the director actually receives the notice;

▪ When the notice arrives at the director’s residence or usual place of business;

▪ Five days after a properly addressed notice is deposited in the U.S. mail or with a commercial delivery service; or

▪ The date shown on a return receipt from the U.S. mail or delivery service.

➢ For electronic communications, notice is considered effective when the communication is received by the director’s system in a form capable of being processed. It does not have to be read for the notice to be effective.

▪ A notice sent to the wrong email address or attached to an email on a corrupted file is not effective notice, even if successfully sent by email.

How to Give Proper Notice➢ The nonprofit may use any or all of the above notice methods; the notice does not have

to be the same for all directors or in a format that the director requested

➢ The notice need not describe the purpose of the regular or special meeting, unless required by the articles of incorporation or bylaws

➢ Directors can waive the notice requirement by:▪ Submitting a signed written waiver before or after a board meeting;

▪ Appearing at a board meeting without promptly raising an objection to the lack of proper notice;

▪ Participating in the meeting (by voting or taking part in the discussion), even if the director had objected to the lack of proper notice.

o Useful for emergency situations

Who Has to Attend?➢ A quorum of directors must be “present” for the board to take

action at meetings

▪ Unless a nonprofit’s articles or bylaws indicate otherwise, a majority of

the board’s directors must be present at the meeting in order to establish

a quorum

▪ D.C. law allows the organization to set the quorum at less than 50% of the

board members in its articles of incorporation or bylaws, but it cannot be

set at less than 1/3 of the board members or less than 2 directors

o You can also choose to set the quorum at greater than 50%

Who Has to Attend?➢ Unless your organization’s bylaws provide otherwise, you can be “present” at

a meeting even if you are not physically at the meeting as long as you can:▪ Hear all of the other directors at the same time

▪ Participate in the meeting (for example, you are able to ask questions, provide input, and cast a vote)

o This could be achieved through conference call or video conference

➢ If not enough directors show up at the meeting to have quorum, try to reach them by phone or video conference so they can still be “present” for the meeting, or consider rescheduling the meeting.

▪ Discussion can technically occur without a quorum, but no actions can be taken

▪ Everyone who eventually votes for the action should be present for the discussion – so save the substantive discussion for when you have a quorum

Voting at Board Meetings➢ Normally, if a quorum is present at the meeting, the affirmative vote of a

majority of the directors present is sufficient for the board to take action

➢ However, the DC Nonprofit Code and an organization’s bylaws may require that a resolution be adopted by a majority (or more) of all directors then in office –e.g., the appointment of directors to board committees; bylaw amendments▪ Thus, if a board has 15 members and 9 are at the meeting, a quorum is present, since

more than half of the directors (8/15) are in attendance

▪ A vote of 5 directors – a majority of those present (5/9) – normally would be sufficient to take action

▪ However, if the matter requires a majority vote of all directors, 8 must vote in favor for it to pass – in other words, almost all of the directors present at this particular meeting

▪ If the matter requires a 2/3rds vote of all directors, not enough directors are present to take action, since you would need at least 10/15 votes to pass

Voting at Board Meetings

➢ NO proxy voting on DC nonprofit boards – directors must be present to vote

➢ Can use unanimous written consent to take action outside of a board meeting – ie. the action is unanimously agreed to by all (100%) the directors currently in office, and a written consent to the action is submitted by every director

Meeting in Executive Session➢ A board is entitled to meet in executive session: board meetings, or a

portion of a meeting, where only the directors meet – staff and other attendees are excluded

▪ Sometimes referred to as a closed meeting or an in camera session

▪ Select staff or professional advisors may be invited to join on a case-by-case basis

▪ Board can vote & take actions during executive session

▪ Must take minutes of executive session meetings – segregate the minutes in a separate document to maintain confidentiality

Meeting in Executive SessionPurposes of Executive Session:

➢ Confidentiality: creates a confidential venue for discussing sensitive or confidential topics (e.g. audit, legal matters, personnel issues)

➢ Candid Conversation: encourages board members to have frank and open conversations

➢ Independent Board Oversight: enables the board to discuss and make decisions without undue influence of staff, donors, or others

➢ Board Development & Self-Management: creates a “safe space” for peer-to-peer relationship building, and to discuss and resolve issues relating to the board itself

➢ Board-CEO Relationship: in sessions where the CEO is invited, allows for candid and confidential conversations between the CEO and the board

How to Prepare for a Meeting?➢ Part of the directors’ duties is to prepare for meetings, which includes reading

materials sent in advance and familiarizing themselves with the issues that will be discussed

➢ How to best prepare for board meetings:

▪ Send materials, including an agenda, at least a few days before the meeting so that directors do not hear about an issue for the first time at the meeting

▪ For any important motion, resolution, or amendment to the organization’s bylaws or policies, include copies of the exact wording in advance

▪ Send reports & financial information beforehand for directors to review

▪ If a controversial decision must be taken, the chair may want to discuss the issue with board members before the meeting

Conducting the Meeting➢ The articles of incorporation or bylaws should specify who is the presiding

officer at the meeting.

▪ This is the President/Chair unless the bylaws provide otherwise.

➢ The role of the Chair:

▪ Ensures that meetings are productive, running smoothly, and running on time;

▪ Sets the agenda for each meeting;

▪ Solicits input from staff, committees, other relevant parties on the agenda.

➢ Meeting Procedure:

▪ You do not need to use Robert’s Rules of Order/formal Parliamentary Procedure. You can have simple and practical rules, but you must apply them consistently

Conducting the MeetingSample Agenda:

1. Chair calls the meeting – establish quorum

2. Introduction of new members, special attendees

3. Review and approve meeting minutes from last meeting

4. Reports

▪ Executive Director

▪ Financial Report

▪ Committee Reports…

5. Old Business – items tabled/unresolved from past meetings, sent to committee, etc.

6. New Business

7. Strategic Discussion Items / Brainstorming

8. Adjournment

Questions / Contact

Jason QuD.C. Bar Pro Bono Center901 4th Street NWWashington, D.C. 20001jqu@dcbar.org

Resources: www.lawhelp.org/dc/ced

“Serving on the Board of Directors” resource collection: https://www.lawhelp.org/dc/resource/serving-on-the-board-of-directors

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