five days prior to the effective date of such informal action a notice in writing of the proposed action is delivered to all members entitled to vote on the subject matter of the vote (which can be accomplished by stating the effective date of such action on the ballot or materials accompanying the ballot). Section 107.40(c). Voting. This section has been revised to clarify that in situations in which no members have a right o vote with respect to a particular matter, the board has the authority to act. This revision clarifies and reinforces the fact hat the corporation has the right to limit voting rights. Section 107.50. Proxies. The changes to this section pro- vide that members may vote by proxy unless the articles of incorporation or bylaws explicitly prohibit proxy voting. In addi- tion, language has been added specifically providing that the lection of directors, officers or representatives by members may be conducted by mail, e-mail or any other electronic means as set forth in revised Section 107.10(a). Section 107.75(a). Books and records. Revisions to this ection bring it into conformity with the corollary provisions of the Business Corporation Act (which governs for-profit corpo- rations). Specifically, the new language makes it clear that a voting member must have a proper purpose in order to make
a valid and enforceable demand to examine the organization’s
books and records of account and minutes. Such demand must
be in writing, and state with particularity the records sought to
be examined and for what purpose. The revisions also specify
that if the corporation refuses examination, the voting member
may file suit to compel such examination and will bear the burden of proving such proper purpose if the purpose is to examine
books or records of account. If the purpose is to examine minutes, the burden of proof will be upon the corporation to establish that the voting member does not have a proper purpose.
Section 108.05(b). Board of directors. Redundant language
Section 108.10(d). Number, election and resignation of directors. The revisions to this section clarify who must approve amendments reducing the size of the board. Specifically, a bylaw
amendment that decreases the number of directors or eliminates
the position of a director elected or appointed by persons or entities other than the members may shorten the terms of incumbent
directors provided that such amendment is approved by the party
that otherwise has the authority to elect or appoint such directors.
Section 108.10(f). Number, election and resignation of
directors. Clarifies that if the articles of incorporation or bylaws
authorize dividing the members into classes, then the articles
or bylaws also may authorize the election of directors by one or
Section 108.35(a). Removal of directors. Clarifies the statutory language that all directors, of any class or category, can be
removed with or without cause (including directors with staggered terms).
Section 108.45(b). Informal action by directors. Simplifies
the provisions regarding demonstration of unanimous written
consent of directors taking action without a meeting. Under the
current act, action by unanimous written consent requires the
actual signature of the person providing consent to meet the
requirement of having a “written record of such approval.” Under
the revised act, an actual signature will no longer be required
— a fax, e-mail or other written record of approval will suffice.
Section 108.60(e). Director conflict of interest. New section (e) has been added to address the situation where a director is “indirectly” a party to a transaction involving a grant or
contribution, without consideration, from one organization to
another by virtue of the fact that such director sits on the board
of each such organization (e.g., a director that sits on the boards
of both a supported and supporting organization). The intent
of this section is to clarify that there are no grounds for invalidating such a transaction based on the involvement of such a
“conflicted” director in the decision making process. Thus, in
a proceeding contesting the validity of such a transaction, the
burden of proving fairness would not automatically be shifted to
the party asserting validity and the participation of such “
interested director” would not be grounds for invalidation.
Section 108.70(b). Limited liability of directors, officers,
board members and persons who serve without compensation.
The change to this section increases the cap on what a director can be paid without losing the act’s limited liability protection from $5,000 to $25,000.
Section 110.30( 4)(ii). Articles of amendment. The change
to this section reflects the revisions made to Section 107.10.
The Forum will continue to educate its members on how to prepare for, implement and take advantage of the new law through
future education sessions at Forum on the River and additional
articles when appropriate. Visit www.associationforum.org for
more information on program offerings and other resources on
the updated act.
Jed R. Mandel and Kimberly A. Pendo are partners at Neal, Gerber & Eisenberg
LLP and serve as the Association Forum’s legal counsel. Mandel may be reached
at email@example.com and Pendo may be reached at firstname.lastname@example.org.