On January 1, 2012, the District of Columbia Nonprofit
Corporation Act of 2010 (the "New Act") went into
effect. As a general rule, the New Act provides D.C.
nonprofit corporations with considerable flexibility to structure
their corporate governance, and for the most part will not require
changes to day-to-day operations. However, numerous default
rules have changed under the New Act and new, more detailed
provisions governing matters like director standards of conduct and
liability, indemnification, member voting rights and ballot voting
procedures, and numerous other topics require D.C. nonprofit
corporations to familiarize themselves with the new law, and
determine whether changes to their governing documents or practices
will be necessary to comply. The following highlights many of
the significant changes that are in store. The District of
Columbia Code can be found online, here.
(1) Applicability (D.C. Code §§
29-414.01, .02) – The New Act is applicable to
nonprofit corporations incorporated in the District of
Columbia. Except for some limited provisions, such as the
change of filing date for the Biennial Reports and an expansion of
the registered agent provisions, the provisions in the New Act do
not affect foreign corporations authorized to do business in the
District of Columbia.
(2) Expanded Corporate Records (D.C. Code
§§ 29-413.01 to .05) – The New Act
specifies expanded recordkeeping requirements for D.C. nonprofit
corporations, and also permits records to be kept in digital
form. Additionally, numerous records must be maintained at
the corporation's principal office, including the Articles of
Incorporation, bylaws, minute books for the most recent three
years, all formal notices to members for the most recent three
years, a current list of names and business addresses of the
corporation's officers and directors, and a copy of the
corporation's most recent biennial report.
(3) Ability to Create Designated Body (D.C.
Code §§ 29-404.30, -406.12) – The New Act
allows an organization to create, through a provision in an
organization's Articles of Incorporation, a new governing body,
called a "Designated Body," that may exercise "some,
but less than all" powers of the board of directors.
This is helpful for committees which exercise the power of the
board but include non-directors.
(4) Different Minimum Officers (D.C. Code
§ 29-406.40) – Previously, D.C. nonprofit
corporations needed to have a President and a Secretary; now they
need to have at least a President and Treasurer, with one officer
having the responsibilities of a Secretary.
(5) Codified Standards of Conduct (D.C. Code
§§ 29-406.30, -406.32, -406.42, -406.70, -406.80)
– The New Act codifies traditional common law concepts of
fiduciary duties for directors and officers, and provides
procedures for approaching conflict of interest transactions.
(6) New Indemnification Provisions (D.C. Code
§§ 29-406.50 to .58) – The New Act
provides very detailed provisions governing when a corporation
must, may, and may not indemnify a director or officer.
Organizations should review their current indemnification
provisions to ensure the provisions are compliant with these new
standards.
(7) Limitation of Liability for Non-501(c)(3) Directors
Must Be in Articles (D.C. Code §
29-402.02(c)) – Liability of directors of
501(c)(3) organizations is automatically limited under the New Act
for certain actions or inactions. Directors of associations
and other non-501(c)(3) corporations must rely on the inclusion of
a specific provision in their organization's articles of
incorporation to have the same limitation of liability.
(8) Reaffirmed Provisions for Board Committees
(D.C. Code § 29-406.25) – Executive
Committees and other committees exercising board authority must
consist solely of members of the board of directors who are
appointed to such committees by a majority of the directors in
office.
(9) Switched Default and Higher Quorum for Member
Voting (D.C. Code §§ 29-405.21,
-405.24) – The new default is that members are
entitled to one vote on each matter submitted to members; the
default quorum for member voting is now a majority of the votes
entitled to be cast on a matter.
(10) Allows for Electronic Membership Meetings and Action
by Ballot for Member Vote (D.C. Code §§
29-405.01(e), -405.09) – If authorized by the
Articles or Bylaws, the New Act allows for meetings of members to
be held through electronic means; the New Act also authorizes
ballot voting by members without a meeting if specific requirements
are met.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.