By: Mark Anshan
We find that many non profit clients have recently requested assistance with updating their By-laws and drafting policy manuals that cover off a wide array of policies that need not nor should be in the By-laws. As well, we notice that many non profit organizations have not reviewed their governance structure and procedures for many years (sometimes decades) resulting in antiquated governance structures that can lead to conflicts within the Board and between the Board and senior staff. The recent implemented new non profit federal law (Canada Non for Profit Corporations Act) and a similar law for Ontario to be enacted in the near future give rise to the need to update and modernize By-laws in order to be aligned with the new legislation and meet the current standards of good governance.
At the same time, the adoption of a comprehensive Policy Manual dealing with subjects that should not be a By-law but establish transparent and understandable policies that govern the operations of the non profit should be a priority for a Board of Directors.
It is not difficult to understand that By-law review and policy formation has not been a high priority for many non profits. Many non profits, especially those with limited resources (both financial and staffing) have, understandably focused their time and energy on the core functions of the organization, namely fundraising and program implementation to meet the organizations objects.
Non profits are finding that having in place updated governance and policies are becoming a requirement for funding from government agencies, public and private foundations. As well, the lack of updated By-laws that do not conform to current law can obviously lead to serious legal issues in regards to compliance and conflicts, particularly in regards to leadership succession and control.
Objects also need to be reviewed periodically and, where necessary, Amended Articles of Incorporation will need to be prepared and filed. Articles of Incorporation, By-laws and Policies govern the rules and regulations by which a non profit operates and therefore keeping them current needs to be a priority. Periodic review with professional advisors insures legal compliance and maintains the integrity of a non profits operations.
By-laws need to deal with essential matters such as indemnification of Directors and Officers, Board composition and election, membership, meetings, standing committees, professional staffing, if needed, borrowing and investment management, email approvals and meetings by conference call.
While By-laws and policies are generally drafted by a lawyer, they can and need to be drafted in simple language for all members and staff to understand and implement.
A clear and well understood investment policy will protect a non profits investments and avoid poor investment decisions and oversight of asset managers that can lead to disastrous results as seen in recent years with some charities having to cease operations and donors seeing the loss of their donation for the intended purpose. The same is equally true for gift a acceptance policy that will guide what types of donations/gifts a non profit can accept that conforms to its mission.
Matters that are not essential to be in a By-law should find its place in a policy statement that becomes part of a comprehensive Policy Manual.
These are not difficult matters to address but do take time and patience to complete accurately. The non profit should have a Governance Committee that reviews these documents in collaboration with professional assistance, as required, and recommends revised By-laws and Policies to the Board and, as required to the Membership.
Mark S. Anshan is Legal Counsel at Drache Aptowitzer.