A board of directors is a requirement for the operation of a New Jersey 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.
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New Jersey Board of Directors Requirements
The New Jersey Nonprofit Corporation Act, Section 15A:1-2, defines a nonprofit board of directors as:
b. "Board" means the board of trustees or the group of persons vested with management of the business and affairs of the corporation irrespective of the name by which the group is designated; "entire board" means all the trustees then in office;
The number of required directors on the board is laid out in Section 15A:6-2:
The number of trustees of a corporation shall be not less than three. Subject to any provisions contained in the certificate of incorporation, the bylaws shall specify the number of trustees or that the number of trustees shall not be less than a stated minimum or more than a stated maximum, with the actual number to be determined in the manner prescribed in the bylaws, except as to the number constituting the first board.
Putting It Into Practice
A New Jersey 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 Jersey MUST:
- Have a minimum of three unrelated board members
- Elect the following members: president, treasurer, and secretary
What Is the Function of the Board of Directors?
The Nonprofit Corporation Act, Section 15A:6-1 establishes the role of the board of directors in the following manner:
The activities of a corporation shall be managed by its board, except as in this act or in its certificate of incorporation otherwise provided. Trustees shall be at least 18 years of age and need not be United States citizens or residents of this State or members of the corporation unless the certificate of incorporation or bylaws so require. The certificate of incorporation or bylaws may prescribe other qualifications for trustees.
Putting It Into Practice
Before forming your New Jersey 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 Jersey, a nonprofit’s board of directors also must fulfill certain legal responsibilities. The two most common legal responsibilities of a New Jersey 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 Jersey 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 Jersey 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 Jersey nonprofit’s board of directors can be filled according to Section 15A:6-5 of the Nonprofit Corporation Act:
a. Unless otherwise provided in the certificate of incorporation or the bylaws, any trusteeship not filled at the annual or biennial meeting and any vacancy, however caused, occurring in the board may be filled by the affirmative vote of a majority of the remaining trustees even though less than a quorum of the board, or by a sole remaining trustee. A trustee so elected by the board shall hold office until the next succeeding annual or biennial meeting and until a successor is elected and qualified.
b. Unless otherwise provided in the certificate of incorporation or bylaws, when one or more trustees shall resign from the board effective at a future date, a majority of the trustees then in office, including those who have so resigned, may fill the vacancy or vacancies, the vote thereon to take effect when the resignation or resignations become effective. Each trustee so chosen shall hold office as herein provided in the filling of other vacancies.
c. Any trusteeship to be filled by reason of an increase in the number of trustees shall be filled by election at an annual or biennial meeting or at a special meeting called for that purpose of the members, or of the board if the certificate of incorporation, the bylaws or any other applicable law provides for the election of trustees by the board. A trustee elected by the board to fill the trusteeship shall hold office until the next succeeding annual or biennial meeting and until a successor is elected and qualified.
d. If by reason of death, resignation or other cause, a corporation has no trustees in office, any member or the executor or administrator of a deceased member may call a special meeting of members for the election of trustees and, over the signature of that person, shall give notice of the meeting in accordance with section 15A:5-4, except to the extent that the notice is waived pursuant to section 15A:5-5.
Putting It Into Practice
When electing new members to your New Jersey 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 15A:6-15 further outlines the election of officers to the board:
a. The officers of a corporation shall consist of a president, a secretary, a treasurer, and, if desired, a chairman of the board, an executive director, one or more vice presidents, and all other officers as may be prescribed by the bylaws. Unless otherwise provided in the bylaws, the officers shall be elected or appointed by the board. A corporation may provide alternative titles for those officers; provided that the certificate of incorporation or the bylaws specify which other officer titles correspond to the president, secretary and treasurer and that the alternative titles not be used in completing the annual report filed pursuant to section 15A:4-5.
b. Any two or more offices may be held by the same person, but no officer shall execute, acknowledge, or verify any instrument in more than one capacity if the instrument is required by law or by the bylaws to be executed, acknowledged, or verified by two or more officers.
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 Jersey. 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 three elected officers required for nonprofits in New Jersey 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.
- 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 Jersey, one person can hold two or more elected offices, however, documents that require the signatures of two elected officers will need two different people to sign.
Forming a board of directors is an essential part of creating and operating a nonprofit in New Jersey. 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.