October 15, 2021
A new bill was passed by the Washington legislature to modernize provisions of Washington’s Nonprofit Corporation Act which have not been updated since 1967. The new Washington Nonprofit Corporation Act, codified in RCW 24.03A (the “New Act”) will take effect on January 1, 2022, with changes applying retroactively. The New Act also applies to homeowners’ associations formed under Washington’s Nonprofit Corporation Act.
The New Act clarifies the relationship between members in a membership nonprofit corporation and the organization, the rules with regard to governance by the board and officers, and members’ rights to vote on certain transactions. Nonprofit organizations will need to review their organizational documents and governance structure and plan on revisions to the organizational documents prior to January 1, 2022, to reflect the following changes:
- Membership Structure: Nonprofit corporation can have members or no members and 1 or more classes of memberships with different membership rights and privileges, including voting rights and other governance matters.
- Fiduciary Duties of Members: Members generally do not have fiduciary duties to the nonprofit.
- Electronic Communications and Conferences: By default, electronic communication and email notices are allowed, however members, directors or officers who want to receive written notices can opt out. By default, members, directors, and officers can hold meetings fully or partially online by video conferencing, telephone, or other real time medium.
- Directors and Term. Nonprofit corporations with 501(c)(3) classified as public charities (churches, hospitals, publicly supported organizations) must have 3 directors, while 501(c)(3) organizations classified as private foundations can continue to have 1 or 2 directors. There is a 5-year cap on director terms. Persons under the age of 18 can now serve on the Board of Directors.
- Officers. The current Act requires a president and at least one vice president, secretary, and treasurer. The New Act no longer requires a vice president.
- Members’ Rights. The New Act provides members with certain rights such as: (a) access to records; (b) the right to vote for the election of directors; and (c) the right to vote on fundamental transactions, which include amendments to articles or bylaws, mergers, the sale of all or substantially all assets, domestication, conversion, or dissolution of a nonprofit.
The list above is not intended to be a complete list of the changes in the New Act. This article is also intended as a summary only. For additional details on how the New Act affects your nonprofit organization and the changes required to the nonprofit’s organizational documents, please contact Natasha Belon at firstname.lastname@example.org, or Steve Horenstein at email@example.com.