New
Emergency Action Rules for California Nonprofits
As you may have heard, new provisions were recently added to the
California Corporations Code, at Sections 7140 and 7151. These new provisions permit nonprofit
entities (including mutual benefit and public benefit corporations; See
Corporations Code Sections 5140 and 5151 for provisions applicable to public
benefit corporations) to bypass key fundamental standard corporate requirements
in the event of an emergency.
The new provisions allow nonprofits to, in the event of an emergency:
(1) modify lines of succession
in the event of incapacity of an officer or director
(2) relocate offices
(3) give notice of
meetings in alternative ways, such as publication or radio
(4) modify quorum requirements
for a board meeting
(5) designate
additional or substitute directors
(6) continue to
operate the nonprofit to the greatest extent possible
The new provisions limit the liability of nonprofit leaders acting in
good faith, but also limit the length of duration of emergency powers, and
prohibit actions that would normally require the approval of the members (such
as amending the bylaws).
Is it necessary to amend bylaws in order to employ emergency authority
in the event of a disaster? The answer
to that question is probably “yes.”
Section 7140(m) appears to authorize emergency action unless the
organization’s “emergency bylaws provide otherwise.” Section 7151(g) permits the bylaws to
contain emergency provisions. Taken
together, it appears that these Corporations Code sections require emergency
provisions in the bylaws to trigger the powers set forth in the Code. Further, the organization may tailor its
emergency bylaws provisions to meet its needs.
This could be particularly beneficial to nonprofits that must operate
efficiently even in emergency situations.
The following is suggested as a draft amendment to bylaws of a
nonprofit entity. It could be placed at the end of the bylaws,
or just about anywhere in the Bylaws that makes sense. This is just a draft form, and it should be
reviewed carefully by the organization and its legal counsel prior to adoption.
Article __. Emergency Action
The Board of
Directors or Executive Committee of this Association may, to the full extent of
and in the manner permitted by Corporations Code Sections 7140 and 7151, take actions
and conduct business as may be necessary to protect the interests of the
Association and its membership in the event of an emergency. A written record of all actions taken will
be maintained during the emergency period, and all such actions shall be
subject to review by the Association, in its sole discretion, upon conclusion
of the emergency.
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