A board of directors is a requirement for the operation of a New York nonprofit entity. This elected group serves as the governance of your organization in everything from finances to the nonprofit’s mission.
Electing the right personalities to your board of directors is essential for your organization’s success. This guide will help you select your first board or grow an established board to better serve your nonprofit.
Check out our other guides for a look at how to form a nonprofit organization or how to select a board of directors in other states.
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New York Board of Directors Requirements
The New York Not-for-Profit Corporation Law, Section 102, defines directors and the board of directors as an entity in the following way:
(6) “Director” means any member of the governing board of a
corporation, whether designated as director, trustee, manager, governor,
or by any other title. The term “board” means “board of directors” or
any other body constituting a “governing board”
The number of required directors on the board is laid out in Section 702:
(a) The number of directors constituting the entire board shall be not
less than three. Subject to such limitation, such number may be fixed by
the by-laws or by action of the members or of the board under the
specific provisions of a by-law allowing such action, or by any number
within a range set forth in the by-laws. If not otherwise fixed under
this paragraph, the number shall be three.
(b) The number of directors may be increased or decreased by amendment
of the by-laws or by action of the members, or of the board under the
specific provisions of a by-law, subject to the following limitations:
(1) If the board is authorized by the by-laws to change the number of
directors, whether by amending the by-laws or by taking action under the
specific provisions of a by-law, such amendment or action shall require
the vote of a majority of the entire board.
(2) No decrease shall shorten the term of any incumbent director.
Putting It Into Practice
A New York nonprofit’s board of directors works as a support system for the organization. Its duties include financial management, structural guidance, the hiring of executive directors, and much more. While the board typically isn’t involved in day-to-day operations, it plays an active role in maintaining the well-being of the organization as a whole, its effectiveness, and its financial health.
A 501(c)(3) eligible nonprofit board of directors in New York MUST:
- Have a minimum of three unrelated board members
- Elect the following members: president, vice president, treasurer, and secretary
Recommended: Read our full guide on How to Start a Nonprofit in New York.
What Is the Function of the Board of Directors?
The Not-for-Profit Corporation Law, Section 701 establishes the role of the board of directors in the following manner:
(a) Except as otherwise provided in the certificate of incorporation,
a corporation shall be managed by its board of directors. Each director
shall be at least eighteen years of age; provided, however, that a
member of the board of directors of any girl scout council chartered by
Girl Scouts of the United States of America, Inc., or any Camp Fire
Girls club member serving as a member of the board of directors on the
National Board and National Council of Camp Fire Girls, Inc. or on the
local board of the Camp Fire Girls, Inc. or any member of Aspira of
America Inc. or Aspira of New York Inc. serving on the board of
directors, shall be at least sixteen years of age. Notwithstanding the
above, a corporation organized for educational purposes primarily for
the benefit of individuals below eighteen years of age may include one
director below eighteen years of age who is at least sixteen years of
age. Further, a corporation organized for recreational or youth
development and delinquency prevention purposes primarily for the
benefit of individuals below eighteen years of age may include one or
more directors, the number of which shall not exceed one-half of the
total number of directors for a quorum for the transaction of business,
who are at least sixteen years of age but not over eighteen years of
age. The certificate of incorporation or the by-laws may prescribe other
qualifications for directors, provided, however, any corporation
organized for recreation or youth development and delinquency prevention
purposes, when increasing the number of directors between the ages of
sixteen and eighteen years old to more than one, shall prescribe in its
certificate of incorporation the number of such directors not to exceed
the limitations of this paragraph.
Putting It Into Practice
Before forming your New York nonprofit’s board of directors, it’s important to understand the role this group plays in the success of your organization. The general responsibilities of a board include:
- Enforcing the Organization’s Mission and Purpose: The foundation of any nonprofit is its mission so a board’s chief task involves upholding that mission as well as the organization’s purpose.
- Hiring a CEO/Executive Director: While your board of directors plays an instrumental role in the success and effectiveness of your nonprofit, it doesn’t participate in the daily operations. That makes it vital for the board to hire a CEO or executive director who will provide effective, day-to-day leadership.
- Incorporating New Members: A board also must source and incorporate new board members capable of effectively upholding the organization’s values.
- Assessing the Allocation of Funds: Careful distribution of assets within an organization ensures all areas receive adequate funding and thus supports the success of each aspect of a nonprofit’s mission.
- Generating Funds and Ensuring Financial Stability: Alongside verifying the appropriate distribution of funds, the board also has a responsibility to generate more assets to create a solid foundation for the nonprofit’s long-term financial stability.
- Supporting and Evaluating the CEO/Executive Director: A nonprofit’s board of directors not only serves as a support system for the CEO/executive director, but also assesses their job performance.
- Ensuring the Organization Follows Legal and Ethical Practices: It comes as no surprise that upholding the ethics of a nonprofit is essential to its success in achieving its mission. In this case, the board’s task involves ensuring the organization consistently follows legal and ethical practices across its operations.
- Generating a Positive Public Image: Building trust within the community not only attracts private investors, but also develops credibility among community members who may use the services your organization offers.
- Acknowledging and Addressing Conflicts of Interest: The Internal Revenue Service (IRS) requires nonprofits to develop a written conflict of interest policy that the organization’s board of directors will enforce. This prevents any board member from using their position in order to serve their personal interests.
Additional Legal Responsibilities
In New York, a nonprofit’s board of directors also must fulfill certain legal responsibilities. The three most common legal responsibilities of a New York nonprofit include duty of care, duty of loyalty, and duty of obedience.
- Duty of Care: This involves making appropriate use of the assets held by the organization. Specifically, board members must ensure the use of such funds promotes the good of the organization and those who benefit from its services.
- Duty of Loyalty: This involves acknowledging and disclosing any conflicts of interest as well as making decisions that benefit the nonprofit as a whole rather than a single board member.
- Duty of Obedience: Board members also must ensure the nonprofit adheres to all applicable laws and regulations while operating under the mission and bylaws that form its foundation.
Developing Your First Board of Directors
If you’re still in the process of developing your New York nonprofit entity, choosing the right board members is key to ensuring the effectiveness and stability of your organization. Here are a few tips to help you get started:
- Solidify Roles. Designating functional roles for individual board members — outside of your elected officer’s roles — can improve the board’s overall effectiveness and functionality.
- Develop and Commit to Bylaws. Creating a set of bylaws to uphold the mission of your organization creates a strong foundation to guide board members’ decision-making. In addition, state law may require New York nonprofits to develop bylaws.
- Prioritize Your Mission. Another beneficial strategy when choosing board members is to seek candidates with a passion for your organization’s mission and goals.
- Acknowledge Any Conflicts of Interest. Conflicts of interest will inhibit a board member’s ability to effectively uphold the values and best interests of your organization. That makes it extremely important to assess potential or existing conflicts of interest when evaluating board members for your nonprofit.
Filling Board Vacancies
Vacancies in a New York nonprofit’s board of directors can be filled according to Section 705 of the Not-for-Profit Corporation Law:
(b) Vacancies among directors elected or appointed by special
districts or membership sections, or by bondholders voting as a class,
shall be filled by action of the persons entitled to vote thereon;
except that, if a vacancy remains unfilled for six months after it
occurs, and by reason of the absence, illness, or other inability of one
or more of the remaining directors a quorum of the board cannot be
obtained, the remaining directors, or a majority of them, may appoint a
director to fill such vacancy.
(c) A director elected or appointed to fill a vacancy shall hold
office until the next annual meeting at which the election of directors
is in the regular order of business, and until his successor is elected
or appointed and qualified.
Putting It Into Practice
When electing new members to your New York nonprofit’s board of directors, focus on finding individuals dedicated to your organization’s mission. Here are a few tips to consider as you begin your search:
- Look to Your Volunteers. Volunteers who stand out can make excellent additions to a board of directors. These individuals already dedicate their time and energy to your organization and most likely will bring that same dedication and goodwill to your board.
- Explore Candidates Among Loyal Donors. Donors represent another group to consider when electing new board members because they create the financial foundation for your organization. That means they have a track record of dedicating time and money to ensuring the success and sustainability of your nonprofit.
- Expand Your Search. Diversifying your search to include outside groups can prove effective in creating a well-rounded board of directors.
What Are Elected Officers?
Section 713 further outlines the election of officers to the board:
(a) The board may elect or appoint a chair or president, or both, one
or more vice-presidents, a secretary and a treasurer, and such other
officers as it may determine, or as may be provided in the by-laws.
These officers may be designated by such alternate titles as may be
provided in the certificate of incorporation or the by-laws. Any two or
more offices may be held by the same person, except the offices of
president and secretary, or the offices corresponding thereto.
(b) The certificate of incorporation or a by-law adopted by the
members may provide that all officers or that specified officers shall
be elected by the members instead of by the board, or it may authorize
the president to appoint the other officers, or some of them, subject to
approval by the board.
Putting It Into Practice
Elected officers are members of the board with assigned roles focused on regulating the day-to-day activities of the organization and maintaining its success. Each position should have a clear role defined in the organization’s bylaws.
The board of directors is required to nominate elected officers in New York. Elected officer roles can not only prove helpful in ensuring the effectiveness of the board of directors, but also provide a foundation of leadership.
The four elected officers required for nonprofits in New York include:
- President: As the leader of the board, the president commonly has authority over key activities like signing contracts and hiring or firing employees. This role differs from the CEO/executive director position, which the board typically hires after assigning the president role.
- Vice President: The vice president serves as support for the president. In many cases, the vice president moves into the role of president after the current president completes their term.
- Treasurer: The treasurer is responsible for evaluating the financial health of the organization by keeping track of receipts and spending.
- Secretary: This individual serves as the organizer of the board meetings, which may include scheduling the meetings, informing board members of the meeting schedule, planning the meeting agendas, and recording meeting minutes.
Note: In New York, a nonprofit’s board of directors is required to have a minimum of one vice president. However, there can be several depending on the needs of the organization.
Conclusion
Forming a board of directors is an essential part of creating and operating a nonprofit in New York. Ideally, this group will advocate for your organization’s best interests in everything from finances to public relations. To form or expand a board of directors that will best represent your nonprofit’s needs, search for members who will uphold your organization’s mission and purpose.