We have long ago discovered that most church leaders have only a vague understanding [if at all], of why the church chose to incorporate. Therefore, there is almost always:
- A lack of familiarity of their church By-Laws; Thus not conducting church business in a lawful manner. Some churches have never even drafted, or worse, cannot find their By-Laws.
- A failure to have well written Minutes of the meetings of the Board of Directors;.
- Or having an absolutely empty corporate Minute Book.
It is not uncommon to find only a few scraps of paper in the “Corporate Minute Book.” We have come to anticipate that the church will have the need to write many Resolutions ratifying past actions, in order to update the corporate Minute Book. If church business was conducted but it’s not recorded in the Minute Book, the Judge would likely believe, “it never happened.” I describe the Minute Book as the “Memory,” of the corporation. No Minute Book equals No Memory equals NO DEFENSE in the courtroom.
A few years ago we completed a 35 state ministry trip to the east coast, where we had the privilege of ministering to pastors and leaders in 51 churches. Furthermore, the astounding thing we discovered on this trip, was that 80% of the 51 churches we worked with, had never had an “Organizational Meeting,” with an appropriate Minute in their records. The significance of this very important meeting cannot be overstated, as this would be the first document the Judge would look for in the event of a lawsuit.
If there were no such minute, the Judge would likely determine the corporation to be invalid, [not yet fully formed], and the people and leaders “uncovered.” Without a valid corporation not only the assets of the church, and any insurance monies would be subject to loss, but the personal assets of everyone in attendance is at risk.
Another possibility, if it is a lawsuit, that he might rule that the basic By-Laws of the state would be your By-Laws. In an IRS audit, because there are no By-Laws, the finding may well be that the entire income of the church would be ascribed to the pastor, as his personal income.
WHAT IS THE “ORGANIZATIONAL MEETING?” I describe this meeting as the “Birthing process” of the corporation. I have sat with many pastors and said, “You thought this corporation was formed in 2003, but it does not yet legally exist. What you have here is a viable ‘Pregnancy,’ a legal entity just waiting to be ‘birthed.’” The record by the way, from our personal experience, is a church started 25 years earlier, but had never had this meeting .
Whether there is only one or several names of individuals on the Articles of Incorporation, he [they] are the “Incorporators.” They may even be referred to in the Articles as the initial Board of Directors [Trustees/Elders/Overseers], but this is only intended to be an interim position, the duration of which is only intended to be until the first [or "Organizational"] meeting.
There are at least four key issues which need to be addressed in the organizational meeting of the newly formed church corporation. There are several other items to be addressed as well, but the four minimum issues are:
- The Incorporator(s) meets with the potential/future Board Members. He [they] asks them to serve, and they agree to serve on the Board. Now there is a Board of Directors;
- That the Articles of Incorporation were filed with the state of ___________ is acknowledged, and that a copy of the Articles, with a stamped date of receipt of ________ was returned, and will be placed in the corporate records.
- By-Laws for the corporation, having been presented and discussed, would be adopted by the Board.
- Officers would then be elected, to fill the offices/positions as defined in the corporate By-Laws.
A well written “Organizational Meeting Minute,” recording the above actions, must be written and filed in the church corporate Minute Record Book..
As a result of this meeting, we now have a legal entity, a Board of Directors, a set of By-Laws by which the Board of Directors conduct the church business, and duly elected Officers. The corporate structure, intended to provide limits of liability protection in the event of a lawsuit, is now in place to do the job – assuming the Board continues to meet and write their Minutes.
YOU MAY BE ASKING, what can be done to rectify those issues of neglect? It is totally acceptable for the present Board to meet and determine what past issues have not been recorded in the Minutes, then write a Minute with several Resolutions, “Ratifying” all noted past actions. This action breathes new life into an otherwise valueless Minute Book. This reconstructed Minute Book would be totally acceptable, and valid, in the courtroom. The reconstruction, however, would need to be done before a Judge subpoenaed the church records.
In the title I spoke of “A Sin Of Omission” The word “Sin” means “Missing the mark,” and it is no exaggeration to say that many churches have really missed the mark in this regard. It is not at all difficult to rectify this situation, and the risks involved in not doing so are far too high.
Contact us to gain further information and assistance. Please take the necessary steps to fill in the blank pages of your corporate Minute Book. To help you to easily do this, we have written another Manual calledSamples Addendum which has two sample Organizational Meeting Minutes, where the past organizational issues are ratified.
If you would like more information about similar issues, please consider “The Church Administration ‘How To’ Manual.” This Manual, endorsed by three CPA’s, an EA and two attorneys, was updated again in January, 2010, for the 11th time, since its original publication in 1991.
The above information is provided as a service to the Body of Christ by ADMINISTRATIVE ASSISTANCE
Copyright © 2002 by Administrative Assistance
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