A new Washington Nonprofit Corporation Act, codified in RCW 24.03A (the “New Act”) took effect on January 1, 2022, with changes applying retroactively. The New Act also applies to homeowners’ associations formed under Washington’s Nonprofit Corporation Act.
The New Act clarifies the relationship between members in a membership nonprofit corporation and the organization, the rules with regard to governance by the board and officers, and members’ rights to vote on certain transactions. Nonprofit organizations should review their organizational documents and governance structure and plan on revisions to the organizational documents prior to January 1, 2022, to reflect the following changes:
- Membership Structure: Nonprofit corporations can have members or no members and 1 or more classes of memberships with different membership rights and privileges, including voting rights and other governance matters.
- Fiduciary Duties of Members: Members generally do not have fiduciary duties to the nonprofit.
- Membership Structure: Nonprofit corporations can have members or no members and 1 or more classes of memberships with different membership rights and privileges, including voting rights and other governance matters.
- Electronic Communications and Conferences: By default, electronic communication and email notices are allowed, however members, directors or officers who want to receive written notices can opt out. By default, members, directors, and officers can hold meetings fully or partially online by video conferencing, telephone, or other real time medium.
- Electronic Communications and Conferences: By default, electronic communication and email notices are allowed, however members, directors or officers who want to receive written notices can opt out. By default, members, directors, and officers can hold meetings fully or partially online by video conferencing, telephone, or other real time medium.
- Directors and Term. Nonprofit corporations with 501(c)(3) classified as public charities (churches, hospitals, publicly supported organizations) must have 3 directors, while 501(c)(3) organizations classified as private foundations can continue to have 1 or 2 directors. The term for directors is limited to 5 years, however there is no overall tenure cap per person so directors can be re-elected every 5 years. For nonprofit corporations formed before January 1, 2022 if the term in the Articles and Bylaws is longer than 5 years, the New Act allows the directors to continue for the duration of their existing terms, subject to certain limitations. Persons under the age of 18 can serve on the Board, however the number of directors who are underage cannot be more than or 3 or 1/3 of the total number of directors, whichever is fewer.
- Directors and Term. Nonprofit corporations with 501(c)(3) classified as public charities (churches, hospitals, publicly supported organizations) must have 3 directors, while 501(c)(3) organizations classified as private foundations can continue to have 1 or 2 directors. The term for directors is limited to 5 years, however there is no overall tenure cap per person so directors can be re-elected every 5 years. For nonprofit corporations formed before January 1, 2022 if the term in the Articles and Bylaws is longer than 5 years, the New Act allows the directors to continue for the duration of their existing terms, subject to certain limitations. Persons under the age of 18 can serve on the Board, however the number of directors who are underage cannot be more than or 3 or 1/3 of the total number of directors, whichever is fewer.
- Officers. The current Act requires a president and at least one vice president, secretary, and treasurer. The New Act no longer requires a vice president.
- Officers. The current Act requires a president and at least one vice president, secretary, and treasurer. The New Act no longer requires a vice president.
- Members’ Rights. The New Act providesmembers with certain rights such as: (a) access to records; (b) the right to vote for the election of directors; and (c) the right to vote on fundamental transactions, which include amendments to articles or bylaws, mergers, the sale of all or substantially all assets, domestication, conversion, or dissolution of a nonprofit.
The list above is not intended to be a complete list of the changes in the New Act. This article is also intended as a summary only. For additional details on how the New Act affects your nonprofit organization and the changes required to the nonprofit’s organizational documents, please contact us for a consultation.