Having a founding document is incredibly important for nonprofits—no matter where in the world you operate. Use this guide to learn what it is, why your nonprofit needs one, and how you can create one in a few simple steps.
What is a founding document?
A founding document outlines how decisions are made in a nonprofit organization and who has the right to make them (e.g. your organization’s board of directors or voting members). It will usually have a title such as constitution, by-laws, memorandum and articles of association, statutes, or trust deed, if your organization is registered as a Trust.
Why does your nonprofit need a founding document?
In most countries, this document is required for your organization to register as a charitable organization with your national or local government. Additionally, an organization cannot be run entirely by its executive director—that would be exhausting! An executive director needs a board or a group of voting members to keep the organization focused on its mission. The founding document describes how exactly the board or voting members make decisions that help the executive director lead the organization.
A proper founding document will have all or most of the following:
1. The name of the organization, the organization’s mission statement, and its objectives
2. A statement that limits the amount of personal money that board or voting members would need to contribute to organization debts, e.g. by guarantee or by shares
3. Your board members’ or voting members’ rights
4. The number of board members that must be present at a meeting for official decisions to be made
5. Titles of officers within the board and their responsibilities, how the officers are selected, and how long they are allowed to serve in that role. A board of directors, for example, usually has a president, vice president, secretary, and treasurer. There may be more offices, but there are rarely fewer.
6. Procedure for removing a board member or officer, including what kind of behavior can be punished by removal, procedures for a board member to resign, and how to fill that empty position (for example, through special election)
7. How the organization is allowed to earn income, and how the board of directors is allowed to use to track income and make payments (for example, who is allowed to access the organization’s bank account)
8. How to call board meetings, how many meetings to hold in a year, and how much notice needs to be given before a board meeting
9. Any committees the organization may have, their responsibilities, and how committee members are selected from within the board
10. A statement outlining the procedures for dissolving the organization, and what happens to the organization’s assets after debts are paid if the organization is dissolved
11. How the founding document can be changed, usually through an amendment. Often, this happens by vote at a board meeting
12. Which document within the organization should be followed in the event that two documents have clauses that can’t both be followed at the same time.
A downloadable sample Nonprofit Bylaws (founding document) template can be found here. Please note that this sample template was written for United States nonprofits and contains language that may not apply in your country.
A founding document is not:
- Your organization’s certificate of government registration
- A funding document (for example, a grant proposal or report)
- A Memorandum of Understanding with another organization
- An organization policy about one specific issue (for example, a Safeguarding Policy, Anticorruption Policy)
- The organization’s profile
Founding documents, when followed closely, show your community and your national or local government that your organization is practicing good governance. Making decisions in a way that aligns with what’s written in the founding documents safeguards your organization from losing its charitable registration and any tax benefits that come with it!
That is why it is crucial for your organization to pay close attention to its founding documents, not only at the time the documents are written but also in everyday practice. This will help keep your organization aligned with its values, as well as ensure it is serving its community effectively.
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