CalNonprofits Articles

A little-noticed change in the California Nonprofit Corporations Code has an important change for nonprofits: there can no longer be non-voting members of the board of directors. Attorney and CalNonprofits volunteer Gene Takagi explains:

A revision of the Nonprofit Corporations Code takes effect on January 1, 2015 and clarifies the term ex officio and the principles of voting nonprofit board members. A little background:

Non-voting board members: It’s not uncommon for nonprofits to provide in their bylaws for non-voting board members, but under California law, such positions do not exist. Board members, or directors, as they are termed in the law, each have one vote on any matter presented to the board for action. So, any person entitled to attend board meetings without a vote is not a board member at all, even if your bylaws specify so.
What ex officio really means

Ex officio: The term ex officio is often misused to mean non-voting, but it actually means "by virtue of one’s office." An ex officio director holds office as a director not by election, but by holding another office that gives her the right to be a director for so long as she holds that other office. For example, an executive director who is also an ex officio director is a board member for as long as she remains the executive director. In some cases a public official -- such as the mayor or the city librarian -- may be an ex officio member of a nonprofit board. Some nonprofits give ex officio, non-voting status to founders or former board members.

The new law explicitly states that "[a] person who does not have authority to vote as a member of the governing body of the corporation, is not a director … regardless of title." The revision also effectively provides that a person with the designation of ex officio director in the articles or bylaws shall have all the rights and obligations, including voting rights, of a director unless the articles or bylaws limit that person’s right to vote as a director.

In other words, if you have ex officio directors, they now have the right to vote on all matters unless you make clear that they have no right to vote as a director.

California nonprofit corporations that do not intend to empower their ex officio directors with all the rights of a director must make sure their articles and bylaws contain the appropriate limiting language or, better still, eliminate the use of the terms ex officio director and nonvoting director. Getting this wrong may result in a costly dispute or unintentionally empower an individual as a director.

Simple language changes

For those nonprofits that want to provide for the right of their executive directors to attend board meetings without the voting power of a director, instead of using the misnomer non-voting ex officio director to describe such arrangement, they might use the following description: "The executive director has the right to attend and participate at all meetings of the board, except when the board enters executive session, but shall have no voting powers." Nonprofits that have created ex officio, non-voting board members for founders, public officials or others, may consider changing their status to honorary board member, with no voting powers.

Gene Takagi, is the managing attorney of NEO Law Group, contributing publisher of the Nonprofit Law Blog, and a regular contributor to Nonprofit Radio. Gene, a former Outstanding Barrister of the Year (Bar Association of San Francisco) and adjunct professor of nonprofit law, has been published by The Chronicle of Philanthropy, The Nonprofit Times, and The Nonprofit Quarterly and spoken at conferences for Independent Sector, BoardSource, and the American Bar Association. Gene is also a frequent presenter at CalNonprofits events.

Comments   

+1 # Jenni Shen 2015-02-04 11:37
Thanks for the clear article on this, Gene!
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-1 # Nancy Berlin 2015-02-02 14:37
Quoting R. M. Hilton:
Can nonvoting members attend Board of Directors meetings for the entire meeting?


First, a clarification about so-called “nonvoting board members”: There is no such thing! All board members can vote. As Gene Takagi notes in the article above, “So, any person entitled to attend board meetings without a vote is not a board member at all, even if your bylaws specify so.”

Of course, nonprofits can choose to involve non-directors in its board meetings. That person could express opinions about matters up for discussion, present reports and be involved in the logistics of organizing board meetings. Examples include having the executive director attend board meetings, an administrative assistant take minutes, or a guest giving information on a particular topic of interest. The directors can excuse these non-directors during parts of the meeting if they choose.
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0 # R. M. Hilton 2015-01-31 19:14
Can nonvoting members attend Board of Directors meetings for the entire meeting?
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+1 # Christina Dragonetti 2015-01-20 15:24
There is no legal guideline for the ED to be or not to be a member of the board.

Quoting M-L Aaltonen:
So, if we have no statement of Ex-Officio Director in our by-laws currently and our Executive Director has not previously been defined as a Board Member, is there any requirement that an Executive Director now be a voting Board Member by default?
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0 # M-L Aaltonen 2015-01-19 10:57
So, if we have no statement of Ex-Officio Director in our by-laws currently and our Executive Director has not previously been defined as a Board Member, is there any requirement that an Executive Director now be a voting Board Member by default? I don't think so but am researching for confirmation.
Thank you for the informative post.
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0 # Pete Horton 2015-01-12 11:48
Good article.
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+1 # Scott.moline 2014-12-07 01:56
Interesting article regarding ex-officio positions on non-profit boards in California starting in 2015
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