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I am the registered agent of my non profit. My board has defaulted

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I am the registered agent of my non profit. My board has defaulted doing business and my CPA is doing a close out audit. There are assets and grant dollars that need to be accounted for. How do I resign the board (should I have all resign?) post the audit that they are responsible for, and then seat a new board, and update the articles of incorporation and reform the non profit?
Submitted: 2 years ago.
Category: Business Law
Expert:  kattorney replied 2 years ago.

Kathie Russell :

Hi and thanks for your question.

Kathie Russell :

You can resign by simply submitting a letter of resignation.

Kathie Russell :

As to the question if all should resign, I'd need to know more about the misfeasance - was there wrongdoing involved, or negligence or just an oversight or - ?

Kathie Russell :

It is possible that some directors should resign, or all, depending upon the circumstances (and I suppose partially upon the results of the audit).

Kathie Russell :

The new board will need to be seated in accordance with the non-profit's bylaws. Many nonprofits call for the current directors to name the new directors or, if you have members, it may be up to the members. You'll have to carefully read the governing documents and proceed accordingly.

Kathie Russell :

The articles of incorporation should not need updated. If you need to reform the nonprofit entirely, you will have to dissolve it by filing articles of dissolution, and then re-file new articles. You should only do this if absolutely necessary though, because it means you will have to go through the entire process of applying for exempt status with a 1023 application to the IRS, which you'll want to avoid if at all possible.

Kathie Russell :

If you can give me some additional information about the problem perhaps I can provide more details.

Customer:

Good day Kathie,

Customer:

I've attached the articles of incorporation that is filed with the state. The by-laws are contained therein. There are no issues of misfeasance. The organization's only source of income was a federal grant of 5 years that comes to an end in Sept 2012. The current board wants to dissolve this corporation since its Head Start program that the by-laws speak of has also lost its federal funding. Both entities are going thru their final audits for the federal grants as well as for state responsible filings. Can the CEO of the foundation who is the registered agent for the corporation entertain receiving the resignations of all current board members? Or must some board members remain to invite new replacement board members after the resignations of some?

Customer:

OH-OH! I forgot to attach the articles:

Customer:

By-Laws of Friend of Families, a not-for-profit organization



MISSION STATEMENT



The Friend of Families Foundation shall support the improvement of life for low-income and challenged families, individuals, including military and the homeless through educational programs, cultural diversity awareness, technological advancements and social services research



ARTICLE I



Corporation


 



  1. The name of the corporation shall be Friend of Families Foundation, Inc.

  2. The organization shall have a seal which shall be in the following form: round, bearing the name of Friends of Families, address, and a logo consisting of the initials FOF and a family representation.

  3. Friend of Families may at its pleasure by a vote of the membership body change its name.

  4. The address of the corporation shall be 2210 Tall Pines Drive, Suite 200, Largo, FL 33771. The name of the registered agent at the corporate address shall be, M. Juanita Heinzen.



ARTICLE II


Purpose



The Friend of Families Foundation, (herein called the “Foundation”) shall be operated for charitable purposes within the meaning of Section 501 (c) (3) of the internal Revenue Code Section 1054, as amended. Such purposes include but are not limited to the following:




  1. To increase public awareness and participation in the goals and objectives of Head Start in Pinellas County, the state of Florida, and nationally.

  2. To provide advocacy opportunities in support of the Foundation’s mission for staff, board, community partners, benefactors and community residents.

  3. To implement and establish activities that will provide opportunities for individuals, agencies, businesses and organizations in fund-raising and public relations activities to address the many issues of low-income and challenged individuals and families as defined in the mission statement.

  4. To serve as the corporate body to receive and administer funds and resources that can supplement and augment the Head Start mission through technology, supporting educational opportunities for low-income and challenged families, assisting families towards employability, entrepreneurial endeavors, financial self-sufficiency, educational opportunities and family self-sufficiency.





ARTICLE III


Membership



General




  1. The Foundation shall have a Board membership of up to seven (7) members and no more than fifteen (15) members.

  2. Open to all for consideration of membership, all perspective Board members must be citizens of the United States and the state of Florida.

  3. Fifty-One percent (51%) of the Foundation Board can be current members of Head Start Child Development and Family Services, Inc.’s Board of Directors or governance establishment.

  4. No one currently employed by Head Start Child Development and Family Services, Inc. is eligible for Foundation Board membership.

  5. Terms of membership shall be staggered. Qualifying Board members will initially draw lots for terms of three year terms, two year terms, or for one (1) year.


 


Officers




  1. The President of the Foundation Board of Directors shall be an elected position and must meet the requirements of general membership. The President shall stand for election every two (2) years. An elected member whose term is less than two (2) years shall have authority to extend membership to cover the period of office. The President shall be a member of the executive committee


 


The President is responsible for presiding at all meetings, and by virtue of office be Chairperson of the Board. The President shall have authority to appoint committees, permanent and ad hoc, and work in cooperation with the CEO to further the mission and purpose of the Foundation. With the CEO the President sets the agendas of meetings. The President is a primary advocate for the Foundation and consistently seeks out and engages area businesses, organizations and distinguished individuals to be involved with and/or support the Foundation. The President shall be one of the Board officers who may sign checks or drafts of the organization. A primary responsibility of the President along with the CEO shall be to present at each annual meeting of the Foundation an annual report of the activities and finances of the Foundation.


 



  1. The Vice-President of the Foundation Board of Directors shall be an elected position and must meet the requirements of general membership. The Vice-President shall stand for election every two (2) years. An elected member whose term is less than two (2) years shall have authority to extend membership to cover the period of office. The Vice-President shall be a member of the executive committee.


 


The Vice-President shall have authority, in the event of the absence or inability of the President, demonstrate the Vice-Presidential office to conduct business at the same level of authority as if duly elected to the office of President. The Vice-President shall be a member of the Executive Committee of the Foundation.


 



  1. The Secretary of the Foundation Board of Directors shall be an elected position and must meet the requirements of general membership. The Secretary shall stand for election every two (2) years. An elected member whose term is less than two (2) years shall have authority to extend membership to cover the period of office.


 


The Secretary shall be responsible to keep the minutes of the Foundation. The Secretary shall be a member of the Executive Committee of the Foundation. The Secretary shall be responsible to give and serve notices to members with concurrence by the President and CEO. The Secretary shall be the official custodian of the Foundation seal and records. The Secretary shall present to the Board communications addressed to the office of Foundation Secretary. This office shall exercise all duties incident to the office of Secretary.


 



  1. The Treasurer of the Foundation Board of Directors shall be an elected position and must meet the requirements of general membership. The Treasurer shall stand for election every two (2) years. An elected member whose term is less than two years shall have authority to extend membership to cover the period of office.


 


The Treasurer shall share with the CEO the care and custody of all monies belonging to the Foundation. The Treasurer shall be the primary Board member with responsibility to sign checks or drafts of the Foundation. No special fund shall be set up that shall make it unnecessary for the Treasurer to sign the checks prior to issuance. The Treasurer along with the CEO shall render a financial report at stated intervals to the Board of Directors.


 


No officer shall for reason of his office be entitled to receive any salary or compensation, but nothing herein shall be construed to prevent an officer or director from receiving compensation from the Foundation for duties other than as a director of officer.


 


ARTICLE IV


Removal of a Director


 


Any director may be removed when sufficient cause exists for such removal. The Foundation Board of Directors may entertain charges against any director. Grounds for removal will include, but may not necessarily be limited to missing three board meetings during a yearly period, disruptive and/or aggressive behavior, conviction of a felony, or behavior such as to damage the reputation of the Foundation. A majority vote at a regular or special meeting that has a quorum is sufficient for removal.


 


 


 




ARTICLE V


Committees



Committees of the Foundation shall be either a standing committee authorized by these by-laws or an ad hoc committee with duration determined by its appointed purpose to last no more than one year or less at the discretion of the Board and/or the President.


 


Standing Committees:


 


Executive Committee: The Foundation’s Board of Directors officers constitute the executive committee. In addition to their individual duties, the Executive Committee members are empowered by these by-laws to act on behalf of the Foundation’s Board during periods of sabbatical and in emergencies.


 


Financial Committee: The Financial Committee shall consist of the President, Treasurer, CEO, and two other members to be appointed by the President.


 




ARTICLE VI


Meetings



 


The annual membership meeting of the Foundation shall be held in November of each year. The Board of the Foundation shall annually fix the exact date which shall always be in the appointed month unless impaired by natural disaster or other extreme conditions beyond the Foundation’s control. In such cases, the Foundation shall at its earliest convenience meet the burden of this requirement.


 


The Foundation shall meet bi-monthly. These regular meetings shall be held at 6698-68th Avenue South, Pinellas Park, FL or another announced site as necessary. The Secretary shall ensure that notices are mailed to all Foundation Board members announcing the date, time and place of meetings.


 


The Foundation must have forty-two percent (42%) of its membership, in good standing, present to establish a quorum and conduct official business for the Foundation. A lesser percentage may receive information and/or presentations or adjourn. A percentage of attendance less than the quorum mandated by these by-laws is not authorized to vote or conduct official business.


 


Special meetings of the Foundation Board of Directors may be called by the President when deemed necessary for the Foundation’s best interest. A quorum must be met in order for official Foundation business to be conducted. Assemblies with less than a quorum must adjourn. No information or reports may be shared. The Secretary must ensure that notice is given to all Board members and that they are notified of the meetings date, time, location and purpose. No other business but the specified purpose in the notice may be transacted at a special meeting without unanimous consent of all present at such a meeting.


 


At all meetings, except for the election of officers and directors, all votes shall be by voice. For election of officers, ballots shall be provided and there shall not appear a place on such a ballot that might solicit the identity of the voter. Votes by ballot shall be proceeded by the appointment of 2-3 ‘Vote Inspectors’ by the chairperson or the President, and shall at the conclusion of such balloting, submit in writing the results of the vote. Vote Inspectors must never be a candidate for office or have a personal interest in the outcome of the vote.


 


Order of Business:


 




    1. Sign-In

    2. Approval of the Minutes of the preceding meeting

    3. Receive the CEO’s report

    4. Receive committee reports

    5. Old and Unfinished Business

    6. New Business

    7. Open Agenda

    8. Adjournment



 


 


ARTICLE VII


Salaries



The Board of Directors of the Foundation shall approve and fix the compensation of any employees or contracted staff which in their discretion is necessary for the conduct of Foundation business.




 


 


 


ARTICLE VIII


Staff




  1. The position of Chief Executive Officer (CEO) shall be a staff position and supplemented by salary.

  2. The CEO shall be responsible to file any certificates required by any stature, federal or state.

  3. The CEO shall have the authority to research and present projects, contract for staff assistance, set the Foundation’s calendar for Board approval, have authority for public relations activities and promotions and to conduct the general day-to-day business of the Foundation.

  4. The CEO shall have the responsibility of continuously seeking ways to enhance the Foundation’s fiscal stability

  5. The CEO has the authority to sign checks and drafts and to execute contracts for the Foundation.

  6. The CEO shall be hired by the Foundation’s Board of Directors and will be evaluated at least bi-annually by the Board’s Executive Committee.

  7. The CEO shall work with the Treasurer and have care and custody of all monies belonging to the Foundation; and cause such monies to be deposited in a regular business bank or trust company.

  8. The CEO shall work with the Board Treasurer to render financial reports at agreed upon intervals to the Foundation Board of Directors.


 


 


ARTICLE IX


Amendments



These By-Laws may be altered, amended, repealed or added to by an affirmative vote of not less than two-thirds (2/3) of the members.


 




Affirmed By: Date:


 


 


_______________________________­­____________________________________


PRESIDENT



____________________________________________________________________


SECRETARY


 

Kathie Russell :

OK, I understand. If the corporation has to dissolve, then there is no need to appoint board members (regardless of the articles/bylaws). Since this corporation will be entirely gone, those documents will no longer apply. As I understand from your last post, it will be dissolved and an entire new company will be incorporated. This new company will then have to go through the process to be approved as a 501c3 with the IRS. Since it is starting from scratch, the old board members need not be involved at all in choosing the board for the new company.

Kathie Russell :

Also, if the corporation is dissolving, no board members need to resign. Since the corporation will no longer exist they will be definition cease to become board members.

Customer:

I sent an updated statement. This conclusion is not correct. The corporation is not dissolving. The corporation will continue and search for new grants and opportunities.

Kathie Russell :

OK, yes, that makes much more sense. I was wondering why it was going to dissolve as that does not seem necessary.

Kathie Russell :

Next question, why do any of the board members need to resign?

Customer:

They want to get out the board member business is the easist way to put it. In their minds this is the perfect time to just close the doors for them on any future responsibilities.

Kathie Russell :

Your bylaws provide that the board of directors are elected by the members. However, the bylaws aren't written correctly - under the "membership" section it talks about the board of directors, so it's actually unclear whether or not the nonprofit even has members.

Kathie Russell :

Any director who wishes to resign can certainly do so.

Kathie Russell :

To elect new ones, your membership needs to vote.

Kathie Russell :

However, if you don't actually have members (as I suspect may be the case) the bylaws need to be amended.

Kathie Russell :

Perhaps it would be a good idea to do this before the board resigns.

Kathie Russell :

If you don't have actual members, then you can amend the bylaws to remove the "membership" section (should be called "board of directors") and then you can put in whatever provisions you wish to see for board member replacement.

Kathie Russell :

If you DO have members, then call that section "board of directors" and add a new membership section.

Customer:

Thank you!

Kathie Russell :

You are very welcome! Just let me know if you need additional information.

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