If the church would ever be involved in a lawsuit, or found themselves to be subject to an IRS inquiry, well written Minutes are crucial. Only those Ministries that have paid attention to corporate business detail will survive the first “inquiries.” The IRS has the authority to deny [take away] the tax exempt status from the Ministry if wrongdoing is discovered. Well written Minutes should document [For they are the evidence] that the church has conducted all business according to the By-Laws. This will greatly derail any official “inquiry.” If there are no Minutes, the IRS will assume the worst, and church leaders will have the unpleasant task of proving themselves innocent of wrongdoing.
LAWSUIT – Minutes in a court of law: Having proper Articles of Incorporation, and excellent By-Laws, are crucial, but having a Minute Book with many well written minutes in it, is an essential ingredient to having an entity that will afford protection in the day of battle, eg: a legal assault [Lawsuit]. The Minute Book is the primary document the Judge will examine to determine if the business has been run according to the By-Laws. If there are no Minutes, he will likely “Rend the veil,” and the legal protection of the corporation [The "Veil"] will vanish. And then, the liability will fall personally upon the leaders of the church.
The first thing the judge would look for, is the Minutes for the entity’s “Organizational Meeting.” I write a good deal more about this later in this article. For another article I have written about this very important meeting, see – A Sin Of Omission
The Minute Book is also necessary to provide continuity for future Board Members. Having ministered in more than 3,000 church and para-church ministries since 1988, we find that in the vast majority of churches and ministries, the recorded Minutes, if they even have any, are greatly lacking in form and detail.
There are no other records as helpful, or as important. The Minutes have been described as the “Memory” of the legal entity. No Minutes? No Memory! And if there’s no Memory? There is no defense in a lawsuit. You will be utterly helpless! With that having been said, let us share a few pointers about Minutes:
HOW TO WRITE MINUTES – If the Ministry is subjected to an in-depth IRS audit [a programmatic audit] or is involved in a lawsuit where the “Ministry Records” are subpoena, you would soon discover that the Minutes of the meetings of the Board of Directors are the most important of all Ministry records.
NOTIFICATION: All members of the Board must know about the meeting in advance; This can be done by US Mail or verbally. If a meeting is called and one of the Board members has not been given notice of the meeting, then any action taken during that meeting is not a legal action until, and unless, the missing Board member signs a “Waiver of Notification and Approval of Action Form or Letter.”
I cannot emphasize how important Notification is. I recently was asked to work with a church, where the dispute was over the legal membership of the Board. In the nine years of the entity’s existence, one of the Directors/Trustee had never once been notified of the meetings. Yet he was consistently mentioned in various documents, and Minutes, as a Director/Trustee. Bottom Line: Every action taken [including the two loan applications] during these nine years, was deemed illegal. And the loan applications? There is the serious question of them being fraudulent.
MINUTE HEADINGS: It is not sufficient to say,”The meeting of the Board, or Elders Meeting.” Refer to your ministry By Laws to see who has the legal authority. We have used the term “Directors,” throughout our Book of SAMPLES .
- Who met? The Directors, Trustees, Elders? [By-The-Way, any of these terms could be used as the legally constituted authority - even, "God forbid," The Board of Deacons. The key is, what terminology does your By-Laws use?]
- The Directors of what? Use the full legal name, including the statement “a non-profit corporation,” and the state where domiciled.
Here are other important ingredients of excellent minutes:
- State the Date, Time, and Location of the meeting.
- Declare that proper notification was given;
- List, by their Office, those in attendance, and any visitors as well. If any board member is absent, it should be noted in the Minutes that he was notified of the meeting, but that he could not come due to _ _ _ reasons.
- Declaration of a quorum, listing each of the Directors as either present, or absent.
- Approval of minutes of previous meeting by the board. If this is not in the minutes, the previous minutes are only the opinion of the secretary and not the official minutes of the board of directors. Some organizations have the directors sign every minute, and this is probably best, if you can do so.
- Resolution headings: it is a good idea to capitalize and underline the subject of each resolution, so you can easily find it in the older minutes, five or ten years later. Example – ELECTION OF DIRECTORS.
- Keep it simple. Unless you are required to use Roberts Rules of Order, it is not necessary to record who made or seconded the motion, etc. It is sufficient to write – “After discussion a motion was duly made, seconded and carried and it was RESOLVED, that …. “. [Or that the above action be Ratified].
- If there is a “No” vote, the Minutes must record that action, by naming the Director, as well.
- If there would be the need to abstain from voting [eg: when pastors salary package is under discussion] then that Director’s name should be noted as having abstained from voting;
- It is not required to record the discussion, of the members of the Board of Directors, if they never “act” or pass a resolution. In such a case, no Minute is required of that gathering. Only “Action” items are required to be recorded.
- The Meeting Must Be Adjourned. A sample is given on all our sample minutes.
- Each page should be numbered. eg: ( Page 1-of-5 )
Another “By-The-Way” – The Officers of the corporation are usually comprised of those who are the members of the “Board.” They are not another “Board” or group of people.
An Annual meeting of the Board of Directors. Having at least one meeting in a year is the very least of what would be expected in any churches Minute Book. This is the appropriate time to reappoint Members to the Board; elect Officers; Set compensation packages, and Housing Allowances, for the following year; and Ratify any actions taken during the past year without prior approval of the Board. Review and re-approve any minister who had been credentialed, and issue new “Credentials of Ministry.” Review and record all heads of ministry positions in the church. This would also be a good time to receive, and record, the “State of the church annual report” from the pastor [or President of the para-church ministry] and his goals for the new year.
A “called” meeting of the Board of Directors. This is what you would call any meeting held, where issues come up during the year, and is necessary to address them. We have written the SAMPLES Manual, to show you the minimal format and content of writing Minutes. The Sample Minutes, Resolutions and Ratifications (of which there are now more than 100 in this Manual), will serve as a great checklist for your Ministry organization, helping you to:
- Identify issues that should be addressed and recorded in your Corporate Record Minute Book.
- Provide a basic format for writing a Minute for various issues.
RESOLUTIONS – What is a Corporate Resolution? This is the means of recording an action taken by the Board, authorizing or approving an issue in advance.
RATIFICATION – What is this? As our Minute/Record Book is the legal “memory” of our corporate entity, it is imperative to have good records and no “gaps.” If and when we discover a business action has been taken (I.E. an expenditure of a significant amount of monies) without a prior meeting and written resolution of the Board, we must go back and get it in the Minutes. But How? A back dated resolution is illegal. That would be a falsification of records. The proper or legal way, the ONLY way, is to write a resolution Ratifying this past action. This is how thousands of business do it every day. Remember, if it is not in the Minute Book, it could be said, “it never happened.” See our SAMPLES Manual for more than 100 examples we have written to help you address this problem.
THE ORGANIZATIONAL MEETING: What is the “Organizational Meeting?” I describe this meeting as the “Birthing process” of the corporation. I have had many occasions to sit with pastors and say something like, “You thought this corporation was formed in 1993, but it does not yet even legally exist. What you have here is a‘Pregnancy,’ a legal entity just waiting to be ‘birthed.’ It is not yet a legal entity.“ The record by the way, from our experience, is a church that started 23 years earlier, but never had this important meeting.
In a one year period of time, where we had the privilege of ministering to pastors and leaders in 52 churches, we discovered that an astounding 80% of those churches had never had an “Organizational Meeting,” with appropriate Corporate Minutes. The corporation that has never had this organizational meeting, has not yet been “birthed.”
The significance of this very important meeting cannot be overstated, as this would be the first of your documents the Judge would review in the event of a lawsuit. If there were no such minute, the Judge would determine the corporation to be invalid, 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 leadership is at risk. And if “Punitive damages” were awarded, this would be a serious financial burden on your head, until you either paid it in full, you die, or Jesus comes.
What, you have no minutes of an organizational meeting? Then you are part of the 80% crowd I mentioned above. This is a serious omission, but can easily be made whole. To see just how easily this can be rectified, see our Samples – Addendum Manual. You actually have a case of “Bad news – good news.” The bad news is that you are not even tax exempt. For having By-Laws and Minutes in your Minute Book is what makesyou 501(c)(3). The good news [often times], is that you are not legally saddled with the non-biblical, “Democratic” [Congregational] By-Laws you thought you were under; And you are now free to adopt Biblical Church By-Laws. Please also take a look at By-Laws, Discipline, and Structuring for Lawsuits.
If this discourse is of interest to you, please be sure to take a look at our SAMPLES Manual, where we have published more than 100 sample Church Policies and Minutes of Board Meetings, and our Samples – Addendum Manual where we have addressed not only the Ratification issues, but have several Sample Multi-Page Minutes showing how to change the church name, change the church corporation to a para-church entity – and visa versa; and even how to set up a Bible School under the church. An Included CD-Rom allows you to do it all so easily.
The above information is provided as a service to the Body of Christ by ADMINISTRATIVE ASSISTANCE
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, 2011, for the 12th time, since its original publication in 1991.