A Sin Of Omission
Not long 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. 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.
- Or having an empty 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.
Furthermore, the astounding thing we discovered on this trip, was that 80% of the 51 churches that we worked with had never had an "Organizational Meeting," with appropriate Minutes 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, 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 is at risk. Another possibility is that he would rule that the basic By-Laws of the state would be your By-Laws.
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 19 , but it does not yet legally exist. What you have here is a xx year ‘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;
- The fact that the Articles of Incorporation were filed with the state of ___________ is acknowledged, and that a copy, 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 Minute, recording the above actions, must be written and filed in the church corporate Minute 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 business of the church, 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 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 called Samples 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.
Copyright © 2002 by Administrative Assistance
