Introduction
As a board member, it is important to have a separation between personal affairs and those of the organization. Ignoring corporate formalities could lead to what’s called “piercing the corporate veil” which opens one up to personal pursuit by creditors, plaintiffs, and the IRS. Luckily, corporate formalities are set up to keep that separation in tact. This lesson will explain corporate formalities and briefly outline some that you might encounter as a board member.
What are Corporate Formalities?
- Corporate formalities are things that separate business and personal matters/assets.
- “Corporate formalities” are steps and precautions that the business must take to ensure that the corporation remains legally distinct from its owners. (Teri Mayor, Cogency Global)
- Examples include: separate bank accounts for the organization and personnel, holding regular meetings, and filing annual reports.
Read more about corporate formalities here
Five Corporate Formalities (as outlined in your bylaws)
Notice of meeting
At least 48 hours is necessary so that all board members and attendees can come to the meetings well informed. Any necessary information required for well informed decision making and voting should be put into a board packet with enough time for all parties to review and understand the items in the meeting agenda. Your organization’s bylaws or a policy will likely outline when notices must occur.
Quorum
To do any business usually requires 1/2 plus 1 member be present while some bylaws will state a 2/3 majority or other majority to have a quorum. Deliberation and voting are not legally binding without a quorum. Depending on your organization’s bylaws, deliberation and voting might be allowed via email.
Voting and Motions
As mentioned above, nearly all voting and motions require a majority. Your board may have board level committees which can vote and establish policies.
Board motions and votes will typically follow either Robert’s Rules of Order, or Martha’s Rules of Order.
The specifics will be outlined in your organization’s bylaws.
Minutes
Meeting minutes should be kept for all decisions made. These will provide accountability for your organization and serve as a reference point for deliberation and votes.
ORS 192.650 outlines the requirements of minutes for Oregon nonprofits.
Approval and Storage of Minutes
Minutes will be drafted by the secretary (or other delegated party) and approved by a board vote to become finalized. Minutes should be archived in accordance with ORS chapter 192.005-170. Public records requirements will be covered in a later lesson.
The full Oregon Revised Statues can be found Here.