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Taking Board Action

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Must a nonprofit board always take action through a directors’ meeting? May the board circulate an email instead, asking for responsive votes from the directors? What if some directors attend a board meeting and vote there, while other directors email their vote on the same matter? These are common questions asked by nonprofit directors. Thankfully, the answers are clear.

Under the Illinois Not-for-Profit Corporation Act, which closely parallels many other states’ nonprofit laws, nonprofits face an “either/or” choice. More specifically, board action may be taken either: (1) by a vote at a duly called meeting with the requisite quorum, and by a majority or super-majority of directors as prescribed by the bylaws; or (2) by unanimous written consent (e.g., through email, regular mail, or fax) of all directors on the board. No combinations allowed!

Under the first option, the board meeting may be in person, via teleconference, or other media method so long as simultaneous participation is allowed. The meeting thus may have some directors attend in person and others attend via teleconference. The key is that all the directors have the opportunity to dialogue together and thereby fulfill their fiduciary duty of care, to act in the organization’s best interest. Correspondingly, no director proxies are allowed.

The second option is appropriate and helpful for situations where the directors are already fully informed through a board meeting, or where a decision is relatively non-controversial. The unanimity requirement acts as a safeguard against directors acting on a controversial issue without engaging in a open dialogue at a meeting on the proposed action.

For example, a board may thoroughly address at a meeting whether to make a major purchase or employment decision, and then pass a resolution providing a limited scope of authority to a key leader to follow up on negotiations. The later-circulated unanimous consent will contain the specific negotiated details, per the prior board meeting. The consent thus serves to wrap up the matter, without the need for scheduling another meeting.

As another example, a board may need to decide whether to authorize filing for an extension of the Form 990 deadline, such as due to an accountant’s delay. This authorization should be a straightforward matter for unanimous board approval (albeit perhaps the board should later hold a discussion regarding any underlying issues for the late filing). The unanimous consent mechanism thus provides a streamlined and beneficial way for a nonprofit board to provide this authorization without calling a meeting.

In summary, the law empowers boards to act quickly without holding a meeting provided the decision to take the action is unanimous. If the decision is not unanimous, the law requires the board to hold a meeting to dialogue about the decision in greater detail prior to taking the action by a majority or super-majority vote (as determined by the bylaws).

Through meeting votes and unanimous consents, nonprofit boards are well equipped to accomplish their work and fulfill their corporate missions. So meet, consent, and vote, and make sure to take board action correctly!

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