10 Commandments for a Non Profit Company Board

8/2/2019 10 Commandments for a Non Profit Company Board

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ten commandmentprudent activities for the boarof a not-for-profit corporation



he directors of a not-for-profit corporation are bound by two general

(the duty to perform their responsibilities in good faith, in a manner rea

of the corporation, and with such care as an ordinarily prudent person

duty of loyalt

y (the duty to keep the interests of the corporation paramoun

or on behalf of the corporation). these “commandments” provide examples o

should take to act in accordance with its legal duties.

T



I. thou shalt hold regular meetingsThe board does not have to meet each month, but it should hold regular meetings

informed of the activities of the corporation and for the board to provide the appr

II. thou shalt ensure that the corporation

The annual meeting of members is held once a year to elect new directors and vo

by-laws. In most corporations, the directors should elect the president, treasurer, cof directors immediately following the annual meeting.

III. thou shalt keep minutes of board and coMinutes are important. They are a record of the care and diligence that the board

the corporation’s business. Minutes should not be a stenographic record of the pro

influenced major board decisions. They should explain the reasoning behind deci



IV. thou shalt ensure that all government Many federal, state, and local governmental agencies will impose penalties on a

timely basis. A prudent board will ensure that the penalties are avoided.

The most important filings for a Massachusetts not-for-profit corporation include Form PC with the Attorney General’s office within four and one-half months

Annual Report with the Secretary of State’s office on or before November 1 o

Form 990 (tax information return) with the Internal Revenue Service if the c

Form 941 and Form M-941 (employee income tax withholding) with the InterDepartment of Revenue within 30 days after the end of each quarter.

In Massachusetts, not-for-profit corporations do not automatically have an exemapplications for abatement must be filed within the applicable time periods.



V. thou shalt ensure that employment-relatOccasionally, when a corporation experiences poor cash flow, the corporation w

the associated withholdings of employment-related taxes. Failure to pay employ

and officers and directors may be held personally liable for the full amount of an

VI. thou shalt adopt and follow a conflict

A director’s duty of loyalty to the corporation requires that the corporation’s inteconflict of interest policy and follow its procedures for any transaction that may p

particular procedural rules that must be followed in order to avoid draconian mon

transactions. The board should ensure that these procedures, in addition to its ow

VII. thou shalt approve and manage an annua

The board must take responsibility to adopt a written budget that projects sufficie

corporation in each year – whether the revenues come from grants or gifts, or the



VIII. thou shalt approve the salary budgetA prudent board does not delegate this function, but rather establishes a fram

other managers may fix the salaries of the corporation’s employees. The boa

and manage the annual budget unless it exercises oversight responsibility wi

IX. thou shalt review the audit

Massachusetts corporations with annual revenues of more than $250,000 are re

with the Attorney General’s office. Massachusetts corporations with annual rev

file financial statements certified by an accountant with the Attorney General’

reviewed by the board before being filed. Further, if the corporation has a co

should talk with the auditor without any staff present. The auditor works forThe audit committee should use this time with the auditor to learn about any m

not be communicated through the staff.



X. thou shalt approve all bank accounts anEach bank has a set of corporate votes taken by the board of directors, authorizing

borrowing of funds, and specifying which officer can withdraw funds from the ac

the board must formally adopt the votes for the account so that the corporation’s c

the bank form certifying the votes. Remember: the corporation is liable for the fun

Some states and the Internal Revenue Service have proposed legislation imposing

Sarbanes-Oxley Act 2002 on nonprofit corporations, or are considering some of t for nonprofit corporations. We are monitoring these initiatives.

This pamphlet contains general information only and does not constitute specific legal advice. P

or Richard Schaul-Yoder of our Nonprofit Practice Group:

shirin philipp [email protected] richard schaul-yoder rsy@fole



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10 Commandments for a Non Profit Company Board

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