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Governing documents other than bylaws such as the corporate charter

Roberts Rules of Order

If you are in an organization and need to know more about Robert's rules click here. There is a new chapter in the book especially for HOA's.


Volume 6, Issue 1, January, 2000                   
drvideo@comcast.net

                                      OTHER GOVERNING DOCUMENTS

 This newsletter has been mainly concerned with writing and amending bylaws. There are other governing documents with which organizations need to be concerned. The next series of articles will explain these documents and how they relate to each other and the organization itself.

THE CORPORATE CHARTER

Purpose. The reason for an organization to incorporate with the state, and have a corporate charter, is:

1. It can hold property.

2. It can make legally binding contracts.

3. It can sue or be sued as a society in its name.

4. It can have a legacy left it.

5. It protects its members from personal liabilities incurred while performing their duties for the organization.

6. The charter becomes the "person" rather than the member.

7. It provides for a legally recognized status and allows it to own a corporate seal.

8. It provides for perpetual succession.

An organization can not act like a corporation unless it applies for this status from the state or federal government. Most non-profit organizations get permission from the state in which they reside. In general, a Corporate Charter establishes the legal name, address, and object of the organization.

If an organization wishes to incorporate, the organization's secretary should call the Secretary of State's office in the state in which it wants to incorporate, and ask to be sent all the information concerning incorporation. If there are certain state laws that have been adopted concerning this specific type of organization, for example, condo and homeowners associations, the group should get a copy of the laws and make sure the bylaws and corporation papers conform to state laws. State laws may require certain officers, a board of directors, a certain quorum for board meetings, or even voting requirements. State laws may prohibit proxies, limit their use or it may require proxy voting. These requirements should then be in the corporate charter and perhaps with a footnote stating which state law it is fulfilling. If they are not put in the corporate charter they surely should be included in the bylaws. The members will then know that this provision cannot be amended unless the law changes.

In drawing up corporation papers, ROBERT'S RULESS NEWLY REVISED recommends hiring an attorney to draw up the papers. RIDDICK'S RULES OF PROCEDURE states that it should be a local attorney and one is familiar with the laws in that state. All parliamentary authorities agree that the corporate charter should only include whatever is necessary to get incorporated. The charter usually includes the name of the organization, where its headquarters are located, or its general field of operations, its object or purpose, officers, membership, meetings, how it can be amended. Different parliamentary authorities then state other things for example: whether it is non-profit or profit, the amount of real estate it wishes to be authorized to hold, its duration of term of existence. This is where a lawyer should be able to help the organization about what it should include in the document.

Corporation papers should only include that which is required by law. Details should be left to the bylaws. Corporation papers are usually much harder to change and changes are submitted to the Secretary of Sate. It usually costs a fee every time they are amended. Corporate papers should be drawn up with careful consideration for the organization and its future growth.

States have different requirements for incorporating. Working with an attorney who understands the requirements of that state is helpful.

When working with the attorney the organization should provide the basic information. When the attorney finishes writing the draft, he should return it to the members for approval and suggested changes. When the final draft is completed, the attorney returns it to the members for signing the document. It is then sent to the Secretary of State. In some states the Secretary of State also wants the organization's bylaws and other rules on file with the incorporation papers. The final papers may be referred to as Articles of Incorporation, Certificate of Incorporation, or Articles of Association. This is now a legal document and takes priority over the other documents of the organization. This means that bylaws or other governing documents can't adopt anything that is in conflict with the corporate charter. It is imperative that once incorporated that the members don't just put it away in a file or vault somewhere and forget that it exists. It should be included with other documents so that all members know what it states. In one organization with which I am familiar, all the documents are in one binder. The articles of incorporation are first, then the bylaws, then rules of order, then standing rules. A copy is given to each member.

A hint about what to include in the corporate charter. Only put in the charter what is needed for incorporating. Keep statements general about how many meetings, requirements for membership, and the number of officers, and leave the details to the bylaws. For example, the corporate charter might say: "There shall be one annual meeting a year and other meetings as the membership deems necessary, or as stated in the bylaws." Then the bylaws could state that: "There will be four meetings a year on the second Monday of January, April, July and October. The annual meeting will be the second Monday of April."

In one organization that the author was a member, it was discovered that the bylaws had different meeting dates than the corporate charter. The organization decided to amend the corporate charter like the example just given and let the bylaws state the month of the annual meeting and other meetings.

A corporate charter should include how it can be amended. RIDDICK'S RULES states: "No organization may amend its charter rules by its own decision unless the charter permits this."

Final and Most Important Points. Members must remember that the Corporate Charter is the organization's highest-ranking document. The assembly can't adopt anything that is in conflict with the corporate charter. No main motion can be considered that is outside the organization's object.

After an organization incorporates, it will have to file yearly reports with the Secretary of State. A form will be sent to give the names of the current officers. A small registration fee is charged for filing the form. The secretary of the organization should return it promptly. There could be a penalty for not filing it.

Another point that incorporated societies need to consider is to keep all minutes bound. The secretary must sign the minutes. After they are approved by the assembly, the secretary writes at the bottom "approved as read or as corrected". She then initials them and puts the date they are approved.

If an organization gets lazy about filing documents on time and correctly, then the State might have a reason to pierce the corporate veil and look carefully at what is going on in an organization. It could possibly revoke the charter and hold officers accountable for not filling reports with the state.

In volunteer organizations, members and officers should be educated in the responsibilities that go with self-government.

New Organizations. If a group is just organizing and wanting to incorporate at the same time Riddick's Rules gives the procedures. He states on page 44 of his book:

"If a group has not previously been organized and is planning to be incorporated, it prepares in writing for submission to the secretary of state the statistics containing title, purpose, qualification for membership, manner of admission, whether profit or nonprofit, term for which the corporation is to exist, names of resident subscribers, officers and time they will be elected or appointed to office, names of pro tem officers to serve until the first election, number of board members serving pro tem, and by whom the bylaws are to be written, amended, and rescinded. This application must be signed by those competent to contract, as acknowledge by all subscribers, before a notary."