Forum - October 2009

NOT-FOR-PROFIT CORPORATION ACT:

WHAT YOU NEED TO KNOW THE REVISED ILLINOIS

BY JED R. MANDEL AND KIMBERLY A. PENDO

ILLINOIS GOV. PATRICK QUINN RECENTLY SIGNED INTO LAW SENATE BILL 1390, NOW KNOWN AS PUBLIC ACT 96-0649. SIGNED ON AUG. 24 AND TAKING EFFECT ON JAN. 1, 2010, THE BILL UPDATES THE ILLINOIS GENERAL NOT-FOR-PROFIT CORPORATION ACT OF 1986.

The passage of SB 1390 marks the culmination of a nearly three-year public policy effort led by the Forum to bring about important change to the way in which not-for-profit organizations are governed.

Among the most important updates included in SB 1390 are provisions that: make it easier for associations to electronically hold elections; enhance board governance and operations; simplify the demonstration of actions taken by unanimous written consent of the board; and increase the amount not-for-profits can compensate volunteer directors without the loss of limited liability protection.

FORUM’S LEADERSHIP

In early January 2008, a task force of Forum members began critically reviewing the act to determine if and how it could be improved for the benefit of all not-for-profit organizations incorporated in Illinois. After conducting a comprehensive review of the act, with extensive input from not-for-profit executives, practitioners and others familiar with its workings, the task force identified the key provisions that it felt could and should be improved. The intent was to take the act — generally considered one of the best not-for-profit acts in the country — and update

it to reflect the realities of the not-for-profit arena, make electronic communications easier to use, and incorporate certain best practices. The task force developed specific statutory revisions and recommended to the Forum’s Board of Directors that the Forum spearhead efforts to revise the act.

With the approval of the board, the task force prepared legislative language and enlisted the Forum’s lobbyist, Randy Witter of Cook-Witter Inc., to garner support for the proposed amendments from other stakeholders, including the Illinois Society of Association Executives. Under the chief sponsorship of Illinois Sen. A.J. Wilhelmi (D-Crest Hill), SB 1390 was introduced with all of the Forum’s proposed changes. Following adoption in the Senate, SB 1390 also passed the House under the chief sponsorship of Illinois Rep. John Fritchey ( D-Chicago). After 18 months of hard work, Gov. Quinn signed SB 1390 into law. Thanks to the efforts of the Forum, ISAE and other key stakeholders, the entire Illinois not-for-profit community will reap the benefits of the improved act.

While the Forum believes that the act and its amendments provide an excellent set of statutory provisions under which to organize and operate a not-for-profit corporation, the Forum also felt that a number of the act’s provisions could be improved by providing additional clarity and flexibility, or simplification.