Corporate Governance

For Fun & (Non)Profit

whoami

Technical, but this is not a tech talk.

Law school graduate

Engaged with the community

Incorporation is EasyIt’s running the thing that’s hard!

Non-Profit Accountability

For-profit organizations are accountable to their

shareholders

Non-profits, by definition have no shareholders

Donors may expect no accountability

Few non-profits even have (legally recognized) members

Non-profits are accountable to whoever they are intended to

serve

Non-profits are functionally accountable to the state of

incorporation and operation. (And any national charters.)

Duties By Roles

What each person must do

Formal and Informal Roles

Pre-incorporation work “Promoter(s)”

Board of Directors

Officers

President (CEO)

Treasurer

Secretary

People who do stuff on behalf of the org. (“Agents”)

Relationships Between

RolesDifferent hats to wear

Directors

Must approve bylaws

Basic duties for all officers and directors

Fiduciary Duty

Duty of Care

Duty of Loyalty

Good Faith

Collectively must have at least one meeting each year

Meeting Formalities

Must have one annual meeting

All board members must be formally notified at least 2

weeks in advance (if not otherwise regularly scheduled)

Quorum must be established for board meeting to qualify

All binding decisions must be made

In a meeting, recorded in the minutes OR

By unanimous consent with all directors participating

Fiduciary Duty

Basically, don’t raid the organization

Don’t use the organization for your personal

financial gain

Duty of Care

Basically, make an effort to keep up with

what’s going on.

An officer or director may be held personally

liable even if he didn’t know, if they should

have known.

It’s a good thing you’re here!

Duty of Loyalty

Basically, don’t compete with the company

you lead.

Don’t even talk down your own organization.

To be a leader requires that you support the

organization you lead

Duty of Good Faith

The law actually cares what you really intend

The above duties cannot be escaped by nice

words

Officers Duties: President

Responsible for overall functioning of the

organization

No specific responsibilities to the state

Still general duties apply

Officer Duties: Secretary

Keep all corporate records and be ready to

present for inspection upon demand.

Make timely filings with secretary of state

Prepare and submit meeting minutes to the

board for approval

Responsible for tracking and recording

decisions

Officer Duties: Treasurer

Keep all financial records ready to present for

inspection upon demand

Make all necessary tax filings

Accountable for any discrepancies in funds

Exclusive Authorities

What special people may do

Board of Directors

Voting on corporate decisions

(California) Regularly participating in board

meetings

President & Treasurer

Authority to spend organization’s money

Authority to enter contracts for the

organization

Secretary does not have this authority (by

default)

You can write any authority you want into your

bylaws

Special Roles

Promoter Role

Before incorporation, there are no officers or directors

Each person who acts on behalf of the organization does so on

his own liability, presumably for his own benefit or interests.

Property, including intellectual property, must be granted to the

organization.

Decisions, agreements and commitments a promoter makes

must be independently adopted by the board

If the promoter doesn’t want to keep joint liability, he must seek a

novation from the party the commitment is with.

Agent Role

If authorized (implied, apparent or explicit),

anyone can make binding commitments on

behalf of the organization

Agents have same duties as officers when

performing organizational functions except

duty of loyalty.

Penalties Can

Be Serious

You can buy insurance to cover

any mistakes.