GUIDE TO
NONPROFIT
GOVERNANCE 2019
SPONSORED BY
THE NOT-FOR-PROFIT PRACTICE GROUP AND
THE PRO BONO COMMITTEE OF WEIL, GOTSHAL & MANGES LLP
WEIL:\96562388\1\99 995.2581
GUIDE TO
NONPROFIT GOVERNANCE 2019
Title Tab
Not-For-Profit Governance and Best Practices .................................................................................................... 1
An Update to the Key Provisions of the New York Non-Profit Revitalization Act ............................................. 2
Duties and Liabilities Directors and Officers of Not-For-Profit Organizations ................................................... 3
Annual Reporting Requirements and Public Information Regarding Not-For-Profit Organizations ................... 4
Fundamental Tax Law Considerations ................................................................................................................. 5
IRS Form 990 .................................................................................................................................... 5A
Sample Not-For-Profit Board Guidelines ............................................................................................................. 6
Sample Not-For-Profit Code of Conduct and Ethics ............................................................................................ 7
Sample Not-For-Profit Conflict of Interest and Related Party Transaction Policy .............................................. 8
Sample Not-For-Profit Whistleblower Policy ...................................................................................................... 9
Sample Not-For-Profit Investment Policy ............................................................................................................ 10
Sample Not-For-Profit Audit Committee Charter ................................................................................................ 11
Sample Not-For-Profit Nominating and Governance Committee Charter ........................................................... 12
Sample Not-For-Profit Compensation Committee Charter .................................................................................. 13
Sample Not-For-Profit Executive Committee Charter ......................................................................................... 14
Sample Charters for Additional Not-For-Profit Committees .............................................................................. 15
Finance and Investment Committee Charter ..................................................................................... 15A
Strategic Planning Committee Charter ............................................................................................. 15B
Development Committee Charter ..................................................................................................... 15C
Public Relations Committee Charter................................................................................................. 15D
Sample Not-For-Profit Board Self-Evaluation ..................................................................................................... 16
Issues and Concerns for Directors of Troubled Not-For-Profit Organizations .................................................... 17
Warning Signs of Distress for Not-For-Profit Organizations ............................................................................... 18
Comparison of Liquidation Options ..................................................................................................................... 19
Checklist for Directors of Troubled Not-For-Profit Organizations ...................................................................... 20
“Right from the Start: Responsibilities of Directors and Officers of Not-For-Profit Corporations” .................... 21
“Five Best Practices for Transparent Cause Marketing” ...................................................................................... 22
Form of New York Certificate of Incorporation .................................................................................................. 23
Form of Delaware Nonstock Certificate of Incorporation .................................................................................... 24
Form of New York Bylaws .................................................................................................................................. 25
Form of Delaware Nonstock Bylaws.................................................................................................................... 26
Copyright © 2019, Weil, Gotshal & Manges LLP (Weil), www.weil.com. All rights reserved. Quotation for non-commercial use permitted
with attribution. This Guide (including without limitation the sample documents contained herein) is provided for informational purposes
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create, and shall not create or be deemed to create, an attorney-client relationship between you and Weil. You should not act or rely on any
information contained in this Guide (including the sample documents contained herein) without first seeking the advice of an attorney.
Sponsored by the Not-For-Profit Practice Group and the Pro Bono Committee of Weil, Gotshal & Manges LLP
May 2019
Tab 1
1
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Not-For-Profit Practice Group
Introduction: Not-For-Profit Governance and “Best Practices”
Not-for-profit organizations play a significant role in our society by undertaking and providing funding for
projects that benefit the greater good. They provide services and grants in a wide variety of areas that are of
importance to the community, including supporting hospitals, educational institutions, museums and
organizations dedicated to assisting those in need. A not-for-profit organization generally may not, however, be
formed for financial gain, and generally cannot provide profits or excessive benefits for its insiders, donors or
others outside of the charitable class for which the not-for-
profit organization is formed and intended to serve.
The mission of a not-for-profit organization sets forth the purpose for which the organization was formed and
granted special legal not-for-profit status. This mission drives the activities carried out by the organization; the
board of directors is responsible for governing the not-for-profit to carry out this mission. The assets of a not-for-
profit organization are intended to benefit the public good and are restricted by law toward that use alone. Thus,
given the prohibition against use of not-for-profit assets for anything other than the intended charitable objective,
the founders, members, directors, officers and managers of a not-for-profit will have less control over a not-for-
profit corporation than if they established a for-profit corporation and had conventional rights of equity owners or
for-profit directors or management.
Effective governance, with its corollaries, transparency and accountability, leads to increased public trust in the
organization and a greater willingness by the public to donate funds and services. Effective governance also
provides protection from regulatory intrusion.
This outline (i) summarizes steps a not-for-
profit organization may wish to consider taking to ensure that it is
accountable, transparent and effectively governed by an a
ctive and engaged board and (ii) serves as an
introduction to the other documents included in this volume.
Boards of for-
profit organizations have worked to restore public confidence and increase investment in the wake
of a number of highly public governance failures. The steps taken by boards of for-profit organizations –
including those required by reforms embodied in the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), the Dodd-
Frank Wall Street Reform and Consumer Protection Act of 2010, and related rules and regulations – have led to
increased board engagement. Not-for-profit corporations incorporated under New York law (and, potentially, to a
more limited extent, other not-for-profit corporations incorporated in other states) are also subject to the
governance and oversight rules set forth in the Non-Profit Revitalization Act of 2013 (as amended, the
“Revitalization Act”), which amends the New York Not-For-Profit Corporation Law. Most provisions of the
Revitalization Act became effective on July 1, 2014. For a discussion of these amendments, see Tab 2. Boards of
not-for-profit organizations may wish to adapt certain measures that have become “best practices,” even where to
do so may not be required by law.
A summary of statutory and case law applicable to not-for-profit organizations in the State of New York, as well
as liabilities imposed by the Internal Revenue Service (the “IRS”), are set forth at Tab 3.
