Religious Non-Profit Corporations and Regulations

As I mentioned in my previous post, Regulations, as they are referred to in Ohio, or By-Laws, as they are referred to in other States, are essential to the effective management of your Church. So, what kind of issues should be addressed in your Regulations? Ohio Revised Code section 1702.11 addresses the contents of Regulations. You are not limited by the provisions stated in O.R.C. 1702.11.

1. A statement of purpose for your Church. A statement of Faith should also be included.

2. Whether your church will operate in the Hierarchical or Congregational style. If your Church is the member of a larger governing body (i.e. Roman Catholic Churches, etc.) then you would operate in the Hierarchical style. If your church is self-governing and independent, you would operate in the Congregational style.

3. If you are obtaining tax exempt status, the required provisions for 501(c)(3) tax exemption.

4. LIMITATION OF LIABILITY for your Officers, Members and Volunteers.

5. Who may amend (members? directors? etc.) the Regulations and the method required to do so.

6. Identification of Members, Directors, Officers and others, the requirements to become one, the duties of each, and a method of removal and electing new ones.

7. Requirements to be a “member” if you choose to have members. Requirements to be a “voting member” if you choose to have voting members.

8. Rights of members. You should also provide a method for removing members.

9. Time and place of the Annual meeting of Directors (Directors may also be called “Elders,” “Deacons,” or other name.) This should include the specific month of the meeting every year.

10. Time and place of the Annual meeting of the Members of the Church.

11. Method for calling a “Special Meeting.”

12. Notice requirements for meetings.

13. quorum (quorum can be different for Members meetings than Directors meetings.)

14. Voting: how many people must vote to approve any action. It is usually a majority.

15. Method of dispute resolution. You can choose mediation, a hearing procedure, who will decide the issues, and any other procedural matters related to solving internal disputes.

16. Provisions regarding conflict of interests.

17. The organization’s fiscal year.

18. A dissolution clause.

19. Any other provision your Church would like to include.

20. I would recommend you set a date and method for regular review of your Regulations, so you can add, remove or replace provisions as needed. Every one to two years.

This is just an overview. When you meet with your Attorney you should bring up any and all issues that your Church would like to have addressed in writing. As long as your provisions are not in violation of law, you can include any rule or provision your Church deems necessary.

What is a “Board of Directors?”

Black’s Law Dictionary defines “Board of Directors” as: “1. The governing body of a corporation, elected by the shareholders to establish corporate policy, appoint executive officers, and make major business and financial decisions.”

In the context of a non-profit, particularly Religious Organizations, the Board of Directors may also be called “Board of Elders,” “Board of Deacons,” or “Board of Trustees.”

A Board acts as unit, not in their individual capacity as a director. To ensure no personal liability is imposed upon a director, all actions should be taken as the Board of Directors.

The Board can delegate duties to Officers, Members, Committees, or Volunteers, but all major decisions must have the approval of the Board.

It is wise to set out the requirements, duties, manner of election and removal, and composition of the Board in your Regulations or By-Laws.

Religious Non-Profit Corporations in Ohio

I’ve recently been doing a lot of research in the area of Non-Profit Corporations in Ohio. Specifically, Religious Organizations. There are some great general guides out there (one published by the American Bar Association) and websites, but nothing specific to Ohio Law.

Ohio Corporation Law (along with LLC’s and other business entities) uses different terminology than many other States. Churches need to be aware of the impact the Ohio Revised Code has on their operations. I recommend hiring a good Attorney to keep your Church and those that run it in compliance with the Law and protected from personal liability.

In Ohio, when you incorporate you only file Articles of Incorporation. They are very general and only include the name of your organization, a statutory agent (to receive communications on behalf of the organization,), and the principle place of business of your Church. This document should be downloaded from the Ohio Secretary of State’s website and filled in according to your need. No provisions regarding Corporate governance or internal provision should be included.

Once that is filed, nothing else has to be done to be compliant under the Law. However, an Attorney will almost always advise you to compose at least one other document that is vital to the running of your Church: Regulations. Regulations, as they are called in Ohio, may be termed “By-Laws” in other states. They are, as a general rule, the same document. Regulations are where you set out the rules for government of corporation and management; define members, directors, and other officers; and other various provisions regarding the internal operation of your Church.

It is important for your Church to have Regulations for various reasons. First, and most important to your Church, is that without adopting your own Regulations, the provisions of the Ohio Revised Code (section 1702) will govern your Corporation. This is not a terrible thing, but the rules a set forth in the statute are the very minimum of what is required for a corporation. Many times your Church’s needs and desires may be in conflict with the default provisions of the Ohio Revised Code.

Further, if your Church does not set forth its own regulations, there is a good chance that, in the case of a conflict, a Court will become involved to settle any disputes. If you have clear provisions in your Regulations regarding management of the Church and dispute resolution provisions, it can mean the difference between a Court getting involved in a Church dispute vs. the Church deciding a Church dispute. I don’t have to tell you which method is preferable.

From a practical point of view, regulations set forth the standards expected of members, preachers, elders or deacons and officers in your Church. When someone fails to meet those expectations, the Regulations provide for removal of those persons.

An Attorney’s most important job is to advise the client of potential issues before they arise. Adopting Regulations can eliminate some legal issues that may arise in the future. Its worth the time and money now to have an Attorney help you with your Regulations, so you don’t waste even more money and energy litigating issues in the future. In my next post, I will address what provisions and issues should be addressed in your Regulations.