Amendments to Nonprofit
Act Defined
This Law Review column was
written by Kimberly A. Pendo
and edited by Jed Mandel, both
of whom are founding members
of Chicago Law Partners, LLC.
CLP serves as the Association
Forum’s general counsel.
Q: I understand that the Illinois Not-for-Profit Act was amended again this
summer. Could you explain the newest
amendments?
A: On July 2, 2010, Illinois Gov. Pat
Quinn signed Senate Bill 3387 into law.
SB 3387 is a clean-up bill that clarifies
certain revisions made to the Illinois
General Not for Profit Corporation Act of
1986 pursuant to Senate Bill 1390, which
became effective on Jan. 1, 2010, and
made a number of important revisions
to the act.* SB 3387 (now Public Act
96-0994) was effective immediately upon
signature by the governor and further
amends the following three provisions of
the act:
Section 107.10(d) — Informal Action by
Members Entitled to Vote
As part of the revisions to the act made
by SB 1390, Section 107.10 was completely rewritten to ease the requirements on organizations wishing to allow
voting members to take action outside
of a meeting (referred to in the act as
“informal action”). Revised Section
107.10 makes it easier for membership
organizations to conduct business by
mail or electronically. The new provision,
however, inadvertently omitted language
allowing the members of a corporation
to take action outside of a meeting via
unanimous written consent. The ability
to take such action often is of interest to
organizations with a limited number of
members. SB 3387 corrects this oversight.
SB 3387 amends Section 108.45(a) and
(c) to further clarify that, in connection
with informal action taken by the directors (e.g., action taken by unanimous
written consent outside of a meeting),
it is not necessary for every director to
provide a physical signature in order to
evidence approval; instead, such action
must be approved “in writing” by all
directors. As such, an e-mail record documenting the approval of the directors is
sufficient.
Section 108.60(d) (deleting Section
108.60(e)) — Director Conflict of
Interest
It is common practice for certain charitable organizations to be supported by one
or more separate “supporting” charities,
which has the specific purpose of supporting the initiatives of the “supported”
charitable organization. It also is customary that such supported and supporting
organizations share common directors. In
fact, under IRS guidelines, such “
supporting” organizations can qualify as public
501(c)( 3) charitable organizations solely
by virtue of this “support” relationship.
An integral part of the support relationship often is the flow of grants and
contributions from the supporting organization to the supported organization.
Prior to the act’s amendment in con-
nection with SB 1390, many nonprofit
organizations questioned whether an
individual serving simultaneously as a
director of both a supporting and sup-
ported organization could be viewed as
being “indirectly a party to the trans-
action” and, as such, whether such a
director would have a conflict of interest
when authorizing transactions between
supporting and supported organizations
under Section 108.60(d) of the act. SB
1390 added subsection (e) to Section
108.60 to provide guidance to such com-
mon directors. Upon further consider-
ation, however, it was not clear that the
new language fully resolved the issue.
Members of the nonprofit community
still questioned whether subsection (e)
could be misread and misconstrued to
deprive such directors of the protections
afforded by Section 108.60.
Section 108.45(a) and (c) — Informal
Action by Directors
One of the key goals driving the original
amendments to the act was to confirm
and enhance organizations’ ability to use
technology to document and take action.
Accordingly, a number of the amendments specifically allowed required
“approvals” under the act to be evidenced
by electronic communications instead of
by physical “signatures” on documents.
*Please see the October 2010 edition of FORUM
for an article written by Jed Mandel and Kimberly Pendo discussing the amendments made to
the act pursuant to SB 1390.
The answers provided here should not be construed as legal advice or a legal opinion. Consult a
lawyer concerning your specific situation or legal
questions.
