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New Non profit incorporation

Started by DonnaB1 • 14 replies • 1711 views

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DonnaB1 (Missouri)
Posts: 17
Posted:
We just received our Non profit incorporation from the state of Missouri.
Now this HOA was started back in 1981 filed with the county but never filed with the state.
Now that has been done--We have By-Laws & CC & R's written back in 1981.
Can we now make new ones or must we keep the old ones and add new amendments?
The by-laws and CC & R's from 1981 are filed with the county.
Thank you for any help here
DonnaB
MelissaP1 (Alabama)
Posts: 13,836
Posted:
Yes you can modify your CC&R's with a majority vote of the homeowners. Matter of fact, a review and modifying should be done on a somewhat regular basis. I suggest about every 5 years depending on changes/law updates/culture. It can be an expensive time consuming project.
Read your documentation for what counts as a majority vote, if you need a special meeting, and if it is JUST the CC&R's that need filed. Typically, it is ONLY the CC&R's that get filed with the County and the By-laws stay with the HOA. However, some states require BOTH to be filed. Plus both documents are pretty much the same except that one goes with the deed and one is just the daily rules of the HOA. The CC&R's usually are the overriding documents if there are conflicts.
I would suggest having a special meeting to review and discuss the current CC&R's and By-laws and possible changes wanted. Keep in mind that some laws have changed over the years such as satellite dishes. The documents may need to reflect new technology that wasn't available back in the 80's. (Remember the old satellite dishes?)
Hire a good contractual/business lawyer. One that has worked with HOA law before. Real Estate attorney's may not be the best fit for this. You are dealing with corporate laws now that you are incorporated. Make sure everyone understands this.
It's not going to be easy. It took us almost 2 years to modify ours and about $1,700 to file. That didn't count the distribution costs or the time it took for people to start conforming to the changes. It's a good thing to do, but it will depend on how willing people are to make and accept the changes. Good luck!
Former HOA President
DonnaB1 (Missouri)
Posts: 17
Posted:
Thank you, Melissa
for the excellent advice. I am sure I will be back to ask loads of questions!
DonnaB

RogerB (Colorado)
Posts: 5,067
Posted:
Donna, you do not file a new Declaration of CC&Rs; you amend the existing one. The Declaration should spell out how it can be modified. Usually at least 2/3 of all homeowners must approve of any amendment unless you have a state statute which has reduced that percentage. The Declaration is the primary controlling document of an association. It can be difficult and time consuming to get sufficient approval to amend the Declaration so do it only when important changes are needed. Some associations never amend. Also, it does not have to be amended to upgrade for new state and federal laws which superceed existing restriction; but remember those outdated restrictions can not be legally enforced. Amendments to the Declaration must be filed with the County Clerk and Recorders office before they are official.

The By-laws are not similar to the Declaration. By-laws should define the organizational aspects of the association. They can be modified quite easily; usually by 2/3 of the members present at a duly called meeting where a quorum is present. It appears from your post that By-laws may need to be filed with the County also. That is not required in Colorado.

FYI, we will be filing an amendment this week for one of the associations which amended their Declaration this year. It went smoothly (mail in ballot)and quickly (2 months) at a nominal cost (<$200).
DonN (Michigan)
Posts: 357
Posted:
DonnaB1

I suggest that you check your state law. You may find that the initial bylaws must be written by the incorporators. Since your HOA was not incorporated with the state, the bylaws written in 1981 are probably not valid. Read the section of nonprofit law pertain to writing the initial bylaws.

If the incorporators want the old bylaws to be in force, they likely should adopt them as the initial bylaws. Of course, the bylaws should have an amendment provision reserving the exclusive authority for amendment to the members.

RogerB (Colorado)
Posts: 5,067
Posted:
Quote:
Posted By DonN on 04/22/2007 4:57 PM
DonnaB1
Since your HOA was not incorporated with the state, the bylaws written in 1981 are probably not valid.

Don, are you saying that if the HOA choses to not incorporate or lets their corporate status expire does not have valid By-laws? If so, I disagree. I know of many organizations which do not incorporate which have valid By-laws.
DonN (Michigan)
Posts: 357
Posted:
RogerB

If I understand the original post correctly, bylaws were written in 1981, but nothing was filed with the state creating the owners association as a nonprofit corporation. Consequently, any bylaws created at that time are for a non-existent corporation, and therefore likely have no status.

It seems to me that the initial bylaws have to be created after incorporation with the state. For example, in the Michigan Nonprofit Corporation Act, Sec. 231. (1)(a) states, "The initial bylaws of a corporation shall be adopted by its incorporators, its shareholders, its members, or its board." Accordingly, in Michigan the initial bylaws would have to approved by one of those methods with the current groups after incorporation.

I don't have an answer to the second question re lapsing of corporation status because of failure to renew. I suspect there is case law on this question — somewhere.
RogerB (Colorado)
Posts: 5,067
Posted:
Don, I guess we will have to agree to disagree. I realize a non-profit corporation requires By-laws; but this does not apply to an organization which is not incorporated. I know of many organizations with By-laws which are not incorporated. Can you provide a reference where it states such By-laws are not valid?
DonN (Michigan)
Posts: 357
Posted:
Roger, I doubt there is a good reference. It is a matter of interpretation of the law. How can bylaws of an organization be enforceable under state law if the organization is not registered or incorporated under state law? I suspect that most CC&Rs authorize a nonprofit corporation or equivalent.

Without a formal organization and authority, who represents the organization? How can any bylaws be valid if there is no formal authority?

The National Law Commissioners have developed a Uniform Unincorporated Nonprofit Association Act (1996) available at
. Some states may have adopted a version of this model act or a separate statute. It may work for organizations that remain incorporated. However, I doubt that such an act would apply to an association required in the CC&Rs to be a nonprofit corporation or equivalent under a specific state law.
DonN (Michigan)
Posts: 357
Posted:
Roger,

The link to the unincorporated act didn't post above. Here is another try.

http://www.law.upenn.edu/bll/ulc/fnact99/1990s/uunaa96.htm
BradP (Kansas)
Posts: 2,640
Posted:
Ok...here is my question then. If an HOA fails to file their annual report with the State and then loses good standing with the state isn't that a loss of their corporate shield? How would that affect your bylaws then?
RogerB (Colorado)
Posts: 5,067
Posted:
Don,
Thanks for the reference. This illustrates the need for incorporation when there can be liability incurred by an organization. There can be serious ramifications related to liability to the individual members of associations which are not incorporated.

FYI, I reviewed the CC&Rs of 4 HOAs - 2 included reference to incorporation under the not for profit corporation act and two did not. Of the two that didn't, one referred to the Colorado Common Interest Ownership Act. All 4 CC&Rs provided for automatic membership in the homeowners association.
DonN (Michigan)
Posts: 357
Posted:
BradP

If the owners association fails to keep its charter with the state current, my guess is that reinstatement with the old bylaws might be difficult. And I emphasize "my guess". If the association took some action in the intervening time period which ended up being contested in court, the court might be in a difficult position to affirm that the action is valid under the law.

My bottom line is that keeping the charter for the owners association valid under the law is very important — obviously an important aspect of the fiduciary duty of each board member.
DonN (Michigan)
Posts: 357
Posted:
RogerB and BradP

I discussed this matter with an attorney friend. It is obvious that, when the association is not registered with the state and/or the charter has lapsed, the association may not have any standing under the law. Consequently, any director who claims to be duly elected, acts for the association, receives and spends funds collected from others could be personally liable.

Adhering to the law and the governing documents is very important. Often in owners associations, those requirements are assigned to the "back seat" because it is "only among us".
DonN (Michigan)
Posts: 357
Posted:
While searching the internet on a different subject, I found the article, "Your Association's Suspension Of Corporate Status May Bite You!" at which is on point.

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