Amending Bylaws of a California Nonprofit Corporation

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We are often asked to help nonprofit corporations review their bylaws and amend them as necessary or as desired. Bylaws may need to be reviewed and amended for legal compliance or risk management purposes or to match the existing or desired policies/practices of the corporation. The following are steps for amending the bylaws of a California nonprofit public benefit corporation.

Corporation Without Voting Members

1. Identify the provisions in the Bylaws to be amended. Pay special attention to the impact a change in one section may have to other sections and whether all such changes are consistent with the Articles of Incorporation and any other governing documents. This may mean that multiple other sections and/or documents need to be amended as a consequence of even a single desired change. Consider whether it’s appropriate to have your Bylaws and your desired amendments legally reviewed.
   • Note that some changes to the Bylaws may not have full and immediate impact. For example, if a corporation radically changes its charitable purpose (e.g., from poverty relief to preservation of medieval instruments), its previously acquired assets may still be impressed with a charitable trust requiring them to be used for the original purpose, which may require the corporation to grant such assets to another organization whose mission allows it to further such original purpose.
   • If the Bylaws are amended to increase the length of the term of the directors (e.g., from 1 year to 3 years), the terms of the directors elected prior to such amendment are not extended by such amendment (i.e., they each remain on a 1-year term despite the amendment).
2. Determine whether to draft an Amendment to the Bylaws or Restated Bylaws.
   • An Amendment must be read together with the effective Bylaws (including any previously adopted amendments). The Amendment supersedes only specific provisions of the effective Bylaws.
   • Restated Bylaws replaces the previously effective Bylaws. Restated Bylaws may be preferable where there are multiple sections requiring amendment or where there are already multiple amendments to the Bylaws. An Amendment under such circumstances may make the Bylaws and all of their amendments very difficult to consistently maintain and read. We’ve seen a provision in the Bylaws amended several times by separate amendments, which made reading the Bylaws, as amended, very confusing. It also made the nonprofit look disorganized and ill-informed.
3. Understand that while the Nonprofit Public Benefit Corporation Law generally allows the Board to amend or repeal the Bylaws, the Bylaws may provide that an amendment to certain provisions of the Bylaws requires the vote of a larger proportion of, or all of, the directors that would otherwise be required for a Board action. Where the Bylaws make such provision that a larger proportion of, or all of, the directors are required to take a Board action, an amendment or repeal of such provision can only be made by such greater vote.
4. Understand that the Nonprofit Public Benefit Corporation Law allows the Bylaws to provide that any amendment or repeal requires the written approval of a specified person or persons.
5. Review the Bylaws to see if any of the desired amendments require more than just an ordinary Board action (e.g., the vote of a larger proportion, or all, of the directors or the written approval of a specified person or persons).
6. Draft an Amendment to the Bylaws or Restated Bylaws.
7. Have the draft reviewed and vetted by the Board or an appropriate committee (e.g., governance committee).
8. Once the draft is finalized, have the Amendment to the Bylaws or Restated Bylaws adopted by the Board, contingent, as necessary, on obtaining any other approvals required.
9. if any other approvals are required, obtain a written record of such approval(s).
10. Once all relevant actions have been taken and any approvals received, the Amendment to the Bylaws or Restated Bylaws will be effective. Have the Secretary of the corporation sign a Secretary’s Certificate certifying the date of the Board action approving the document and the effective (adoption) date of the document, if different. Include the document in your corporate records and Board minute books.

Corporation With Voting Members

1. Identify the provisions in the bylaws to be amended. Pay special attention to the impact a change in one section may have to other sections and whether all such changes are consistent with the Articles of Incorporation and any other governing documents. This may mean that multiple other sections and/or documents need to be amended as a consequence of even a single desired change. Consider whether it’s appropriate to have your Bylaws and your desired amendments legally reviewed.
   • Note that some changes to the Bylaws may not have full and immediate impact. For example, if a corporation radically changes its charitable purpose (e.g., from poverty relief to preservation of medieval instruments), its previously acquired assets may still be impressed with a charitable trust requiring them to be used for the original purpose, which may require the corporation to grant such assets to another organization whose mission allows it to further such original purpose.
   • If the Bylaws are amended to increase the length of the term of the directors (e.g., from 1 year to 3 years), the terms of the directors elected prior to such amendment are not extended by such amendment (i.e., they each remain on a 1-year term despite the amendment). In addition, such an amendment requires approval of the members.
2. Determine whether to draft an Amendment to the Bylaws or Restated Bylaws.
   • An Amendment must be read together with the effective Bylaws (including any previously adopted amendments). The Amendment supersedes only specific provisions of the effective Bylaws.
   • Restated Bylaws replaces the previously effective Bylaws. Restated Bylaws may be preferable where there are multiple sections requiring amendment or where there are already multiple amendments to the Bylaws. An Amendment under such circumstances may make the Bylaws and all of their amendments very difficult to consistently maintain and read. We’ve seen a provision in the Bylaws amended several times by separate amendments, which made reading the Bylaws, as amended, very confusing. It also made the nonprofit look disorganized and ill-informed.
3. Understand that the Nonprofit Public Benefit Corporation Law generally allows either (1) the Board or (2) the members to amend or repeal the Bylaws unless the action would materially and adversely affect the rights of members as to voting or transfer. Further, the Articles or Bylaws may restrict or eliminate the power of the Board to amend or repeal any or all provisions of the Bylaws. Also, the Bylaws may provide that an amendment to certain provisions of the Bylaws requires the vote of a larger proportion of, or all of, the members and/or directors that would otherwise be required for a corporate action. Where the Bylaws make such provision that a larger proportion of, or all of, the members and/or directors are required to take a corporate action, an amendment or repeal of such provision can only be made by such greater vote.
4. Understand that the Nonprofit Public Benefit Corporation Law allows the Bylaws to provide that any amendment or repeal requires the written approval of a specified person or persons.
5. Review the Bylaws to see if any of the desired amendments require more than just an ordinary Board action (e.g., a membership action; the vote of a larger proportion, or all, of the directors; and/or the written approval of a specified person or persons).
6. Draft an Amendment to the Bylaws or Restated Bylaws.
7. Have the draft reviewed and vetted by the Board or an appropriate committee (e.g., governance committee).
8. Once the draft is finalized, have the Amendment to the Bylaws or Restated Bylaws approved by (1) the Board (particularly if the Board initiated the drafting, and even if the Board’s approval is not strictly required because the members are able to amend the Bylaws through a membership action); and, as necessary, (2) the members.
9. if any other approvals are required, obtain a written record of such approval(s).
10. Once all relevant actions have been taken and any approvals received, the Amendment to the Bylaws or Restated Bylaws will be effective. Have the Secretary of the corporation sign a Secretary’s Certificate certifying the date(s) of the action(s) approving the document and the effective (adoption) date of the document, if different. Include the document in your corporate records and Board minute books.

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