Correcting the Articles

[Tomm]

Our Articles of Incorporate specifies a specific Arizona Statute (i.e. Title 10, Chapter 5, Sub section) however, the state legislature under the Arizona Revised Statutes the subject matter that that statute was addressing was moved and now is listed as being under Chapter 8, Article 5 of the Arizona Revised Statute.

Question:

Can the corrections be made in the Articles of Incorporation without going thru the requirements that are stated to do so, such as a special membership meeting or 10% of the total membership? A quorum for a meeting of the general membership hasn't been accomplished since 2009!

[Rob Elsman]

No.

[Tomm]

Why wouldn't this simply be a case where State law supersedes RONR, therefore it can be corrected specifically because the current State statute as listed no longer has any meaning within the corporations articles of incorporation? In fact the subject matter currently listed under the old statute covers a completely different subject matter.

[Rob Elsman]

I understand the need to make the modification to conform to the revised designation of state law, but the regular procedure for amending the articles of incorporation must be followed. Be sure to also comply with any statutory or regulatory requirements; for example, in my state, a copy of the amended document must be filed with the Secretary of State.

[Joshua Katz]

Because you're allowed to put nonsense in your bylaws, so the fact that subsequent events made a perfectly reasonable bylaw into nonsense doesn't lift the amendment requirements. State law only supersedes your bylaws (and RONR) when it is procedural and they conflict. Here, we don't know if the law is procedural or not (well, I could look it up, but) it doesn't matter because there's no conflict between your bylaws and the law. No one has the authority to amend your bylaws except the body listed in the bylaws as having such authority, so there's no one who can make the change you want except, presumably, the general membership.

[Gary Novosielski]

2 hours ago, Tomm said:

Why wouldn't this simply be a case where State law supersedes RONR, therefore it can be corrected specifically because the current State statute as listed no longer has any meaning within the corporations articles of incorporation? In fact the subject matter currently listed under the old statute covers a completely different subject matter.

It depends.  What is the nature of the rule to which Chapter 8, Article 5 refers?  It may or may not supersede your bylaws, or even RONR.  But you'd be asking for trouble if the bylaws were not updated to show the appropriate reference.  Unfortunately, your only options are not to change it, or to change it according to the rules contained in your bylaws for their own amendment.  The fact that a section may be superseded or not, does not grant any authority to change the bylaws without normal procedure.

[Tomm]

FYI, the statute governs the provisions that covers the indemnification of members, directors, officers, and employees. Kinda important I would think?

[Joshua Katz]

Yes, indemnification provisions are probably important. But not procedural. And, furthermore, there's still no conflict between the law and the bylaws, the bylaws just contain the wrong reference. They need to be amended through your amendment procedures. 

[Richard Brown]

On 3/20/2020 at 5:10 PM, Joshua Katz said:

Yes, indemnification provisions are probably important. But not procedural. And, furthermore, there's still no conflict between the law and the bylaws, the bylaws just contain the wrong reference. They need to be amended through your amendment procedures. 

 Not that this would change your answer, but the troublesome provision is in the articles of incorporation, not the bylaws. The proper procedure for amending them must still be followed.

Edited March 22, 2020 at 02:58 PM by Richard Brown
Added last sentence

[Richard Brown]

On 3/20/2020 at 12:53 PM, Tomm said:

A quorum for a meeting of the general membership hasn't been accomplished since 2009!

How has your membership been conducting business and electing officers for 11 years without a quorum? Has the organization just been ignoring the quorum requirement?

[Tomm]

Basically, the corporation is run by the board of directors who have the power to change the Bylaws and any board policies on their own, however, the Articles of Incorporation requires amending by the general membership.

This is a 55 and older senior community. The corporation is what controls the 7 recreation centers and 8 golf courses. The board meets twice a month but the general membership only holds one annual meeting,... which few people show up for!

Hope that helps!

[Josh Martin]

2 hours ago, Tomm said:

Basically, the corporation is run by the board of directors who have the power to change the Bylaws and any board policies on their own, however, the Articles of Incorporation requires amending by the general membership.

This is a 55 and older senior community. The corporation is what controls the 7 recreation centers and 8 golf courses. The board meets twice a month but the general membership only holds one annual meeting,... which few people show up for!

Hope that helps!

If the Articles of Incorporation say that the Articles of Incorporation can only be amended by the membership, then they can only be amended by the membership. The fact that there is an outdated reference in the articles to applicable law does not change that.

I am still a bit puzzled, however, as to how the organization has been operating without a quorum of the general membership for the past 11 years. You say that the corporation is "run by the board of directors who have the power to change the Bylaws and any board policies on their own, however, the Articles of Incorporation requires amending by the general membership." Is amending the Articles of Incorporation the only power reserved to the general membership? In most organizations, the board is elected by the general membership. Are the rules on that subject different for your organization?

Edited March 23, 2020 at 06:19 PM by Josh Martin

[Tomm]

The corporation/organization is pretty much run by the Board of Directors. The only employee that the Board has the authority to hire (and manage) is the General Manager who hires his own staff and maintains the day to day operations (i.e. financials, maintaining the recreation centers, club spaces, golf courses and entertainment and other various activities).

The only way a motion or amendment from the general membership is presented, is thru the Board. You need a Board member to present it at a board meeting. In fact, if at the Annual Membership meeting an amendment to the Bylaws is offered, it doesn't require "previous notice" because it can't be approved by the general membership. The amendment would be posted (previous notice) prior to a Board meeting, then the Board would present and vote on the amendment, (or any other motion for that matter), at the next 3 meetings. Once it's approved on the third reading it passes. Of course they have a waiver of the "three reading" rule for issues that require immediate attention!

[Josh Martin]

3 hours ago, Tomm said:

The corporation/organization is pretty much run by the Board of Directors. The only employee that the Board has the authority to hire (and manage) is the General Manager who hires his own staff and maintains the day to day operations (i.e. financials, maintaining the recreation centers, club spaces, golf courses and entertainment and other various activities).

The only way a motion or amendment from the general membership is presented, is thru the Board. You need a Board member to present it at a board meeting. In fact, if at the Annual Membership meeting an amendment to the Bylaws is offered, it doesn't require "previous notice" because it can't be approved by the general membership. The amendment would be posted (previous notice) prior to a Board meeting, then the Board would present and vote on the amendment, (or any other motion for that matter), at the next 3 meetings. Once it's approved on the third reading it passes. Of course they have a waiver of the "three reading" rule for issues that require immediate attention!

Okay, but how do you elect board members? Does the board elect its own members?

[Tomm]

The Board is composed of 9 members for 3 year terms. One third of the Board gets elected each year by the general membership. The Board then elects their own president and officers each year.

[Joshua Katz]

I think the question being asked is how the members have elected one third of the Board each year if membership meetings haven't gotten quorum in 11 years.

[Richard Brown]

@Tomm  We seem to have a conflict here. In one sentence you say this:

11 hours ago, Tomm said:

Basically, the corporation is run by the board of directors who have the power to change the Bylaws and any board policies on their own

Ok, so far so good, but then in the next sentence you say this:

8 hours ago, Josh Martin said:

however, the Articles of Incorporation requires amending by the general membership.

So which is it? Who (which body) has the power to amend the bylaws? The membership or the board of directors? 

Or are you saying that only the membership can amend the articles of incorporation and only the Board of Directors can amend the bylaws?

I might add that I believe several of us are waiting for you to answer the question about how the organization has been functioning and how the membership has been electing a Board of Directors when it hasn’t had a quorum at a meeting in 11 years. Has the organization just been ignoring the quorum requirement?

[Tomm]

ARTICLE VIII – ELECTION OF BOARD OF DIRECTORS

SECTION 1:  POLLING PLACES, TIMES AND DATES

1. Election of the Board shall be held on the second Tuesday in December each year.
2. The Board may schedule earlier voting dates.
3. The Board shall select the number of polling places, their locations and times of operation for voting.
4. The Board shall select the number of days for online voting through the Web Portal.

SECTION 2:  VOTES

The Board candidate or candidates receiving the highest number of votes shall be elected to the vacancy or vacancies for which the election is held.

[Tomm]

Yes, only the membership can amend the articles of incorporation and only the Board of Directors can amend the bylaws

[Joshua Katz]

Just out of curiosity, if this is a community, so the people live there, why is it so hard to gather a quorum that it hasn't happened for 11 years? (Obviously, don't gather one now!) 

[Tomm]

Yes, as I mentioned above, this is one of Del Webbs senior over 55 community's.

Seems like the only way to achieve a quorum would be to threaten to raise the annual assessment fees! When everybody is pretty much satisfied nobody cares about the annual membership meeting. 

[Joshua Katz]

Well, I guess try that, and also give notice about amending the articles. At least, that seems like it might work. Again, though, don't do it now. Wait until after the apocalypse.