ULC Case Law
1629 K Street NW, Ste 300
Washington, D.C. 20006
The world of starting your own church has, as we’ve explored so far, many details that you should not overlook if you wish your church corporate entity to operate within the scope of the law to the best advantage of that structure. To that end there are aside from the formation documents, three other documents that you need to be aware of and to execute properly for appropriate members of the church management team, including but not limited to Trustees, Board of Directors members, and in some circumstances, any churhc or ministry member who is on the payroll (in any manner whether as an employee or in service of your church for other considerations, such as housing). It is especially critical that the members comprising the Board of Directors must be aware of, be in compliance with, and be signatory to these three documents.
The three documents that need to be a part of your corporate governance are the 1) Acceptance to Serve on the Board of Directors, 2) Conflict of Interest Statement, and 3) Waiver of Notice. We will explore all three of these in this article as well as provide some sample documents and links through to any appropriate IRS instructions and forms as applicable.
1. Acceptance to Serve on the Board
When your ministry or church adds a new member to the Board of Directors: It is critical that each new board member sign an incoming board member statement. This statement should be composed of three declarations but can have more declarations custom-tailored to your organization’s needs:
a. The proposed board member accepts the appointment/nomination,
b. The board member will actively and positively participate on the board promoting and advancing all duties and responsibilities appropriate to the board position, and
c. The Board Member agrees to submit to and abide by the Articles of Incorporation and the By-laws of the corporation. (This is important because the bylaws outline directorial clauses such as common interest clause and the standard of living clause that protect the church in case the board member turns against the church and pastor.)
2. Conflict of Interest Statement
To ensure that each Board of Directors member is in compliance with the appropriate inclusion and management principles of the church, each board member must sign a conflict of interest statement. This needs to be done both prior to being approved and positioned as a member of the board, as well as annually on the anniversary of each board member’s inclusion to that body. This is a supporting statement to the conflict of interest policy that must be in the church’s corporate records. This policy needs to be developed at the beginning/formation of the corporate entity. The Conflict of Interest Statement should include at least these 4 declarations but can be tailored to the needs of your church with the best practices of governance in mind.
a. The board member has a copy of the conflict of interest policy;
b. The board member has read and understood the policy;
c. The board member agrees to comply with the policy by signing duplicate witnessed copies – one to be held within the church corporate and personnel records, with the second copy held by the board member in their personal records; and
d. The board member understands that the church/ministry is a tax-exempt, charitable organization and that it must engage in activities that accomplish its purpose in order to maintain tax-exempt status as outlined in the Articles of Incorporation and By-laws.
3. Waiver of Notice
In order to avoid any negative issues derived from board meeting notification, every board member should sign a “Waiver of Notice” before a board meeting begins their duties as prescribed by the By-laws of the corporation.
Some churches and ministries have had their board meeting minutes and actions legally nullified by court order because the church or ministry governing body failed to meet the proper notice requirements when conducting said meeting. The Waiver of Notice is a signed statement by each board member where they waive the notice requirements as required by the Articles of Incorporation, By-laws and other applicable corporate governance rules. This is an important document because it allows for a defensively covered position for the Board of Directors members should a challenge for nullification to an action or resolution arise with a challenge due to lack of proper notice.
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