For most of 2020, everyday life has changed dramatically for almost every American due to the COVID-19 pandemic. However, for nonprofits and their boards, the necessity of continuing to comply with nonprofit law has not changed.
One challenge nonprofit boards face is how to keep things running smoothly — and maintaining compliance with the organization’s governing documents — without being able to conduct in-person meetings, which serve a number of important functions. Board members are still expected to adhere to their fiduciary duties, including oversight of the nonprofit’s management and activities.
While the pandemic has affected the ability of some nonprofits to hold critical fundraising or membership activities, other nonprofits are being called on to perform their missions in the midst of the pandemic, civil unrest, and an economic recession.
Clearly, nonprofit board members are not able to press “pause” on their fiduciary duties simply because they may not be able to meet in person. Directors must find a way to perform normal board operations, even in abnormal times.
California’s emergency provisions
In May 2020, the California Office of the Attorney General released its Charity Governance During the COVID-19 Pandemic guidance for nonprofits. While most of this guidance merely restates what has existed for some time in California law, it is worth noting that these still apply during the COVID-19 pandemic. Nonprofits that operate in California but are incorporated in other states should closely follow the law of the state of incorporation.
Emergency provisions for nonprofits
There are provisions in the California Corporations Code that provide leeway in an emergency. Unless prohibited by the nonprofit’s emergency bylaws, the following actions can be taken to conduct the corporation’s ordinary business operations and affairs during an emergency:
- Notice of director meetings can be given in any practicable manner.
- For quorum requirements, one or more of the officers present at a board meeting can be deemed a director, in order of rank and within the same rank in order of seniority, as necessary to achieve a quorum.
- The board may relocate the principal office, designate alternate principal officers or authorize officers to do so.
- Modify the lines of succession to accommodate the incapacity of any director, officer, employee, or agent.
- Note that the board cannot take action that requires the vote of members or take action that is not in the corporation’s ordinary course of business unless the required vote of the members was obtained before the emergency.
- Directors may participate in the board meeting through telephone conference calls, video conference calls, or through electronic transmission provided that each director can communicate with other directors concurrently and has means of participating in all matters before the board.
- Note that minutes of meetings are required. For clarity in record keeping, all directors should state their names for the record at the beginning of the meeting and each time they speak.
Emergency provisions for religious nonprofits
Meetings of board of directors of a nonprofit religious corporation may be conducted through the use of conference call, electronic video screen communication, or electronic transmission. Religious corporations also have flexibility in an emergency unless their emergency bylaws provide otherwise. During an emergency, the following actions can be taken to conduct ordinary business operations:
- Notice of director meetings can be given in any practicable manner.
- For quorum requirements one or more of the officers present at a board meeting can be deemed a director, in order of rank and within the same rank in order of seniority, as necessary to achieve a quorum.
- Relocate the principal office during an emergency, designate alternative principal offices or authorize the officers to do so.
- Modify the lines of succession to accommodate the incapacity of any director, officer, employee or agent.
- Note that the board cannot take any action that requires the vote of the members or take any action that is not in the corporation’s ordinary course of business, unless the required vote of the members was obtained before the emergency.
In addition, organizations must examine their bylaws carefully to be sure that they do not pull back a generous right granted by default in the statute.
The Church Law Center of California assists religious and secular nonprofits with governance challenges. We can help your organization examine its board procedures and develop good practices. To find out how we can be of help to your organization, call us at (949) 892-1221 or reach out to us through our contact page.