Does this Bylaw Conflict with the Articles of Incorporation?

[Tomm]

 

Arizona Revised Statutes:

10-3206. Bylaws

A. The board of directors of a corporation shall adopt initial bylaws for the corporation.

B. The bylaws of a corporation may contain any provision for regulating and managing the affairs of the corporation that is not inconsistent with law or the articles of incorporation.

10-3721. Voting entitlement generally

A. Unless the articles of incorporation or bylaws provide otherwise, each member is entitled to one vote on each matter voted on by the members. A member is entitled to vote only on those matters expressly provided in the articles of incorporation or bylaws.

B. Unless the articles of incorporation or bylaws or written agreement signed by the subject members and delivered to the corporation provide otherwise, if a membership stands of record in the names of two or more persons, those persons' acts with respect to voting shall have the following effect:

1. If only one votes, the act binds all.

2. If more than one votes, the vote shall be divided on a pro rata basis.

Our Corporations Articles of Incorporation Article VIII, paragraph 4 states: "The Bylaws may be amended, modified, revised, or revoked by the Directors or by the Members. In the event of conflict concerning the Bylaws as amended, modified, revised, or revoked by the Directors, the action of the Members shall prevail."  

Question: Does the following Bylaw conflict with the corporations articles of incorporation because it doesn’t allow the Members to vote on amendments or motions at their own Annual Membership meeting? It’s my contention that to prevent the Members from voting the above article should have read, “The Bylaws may be amended, modified, revised, or revoked by the Directors or by the Members in accordance to Article IV, Section 4 of the Bylaws…”. 

Bylaw, Article IV, SECTION 4: MEMBERSHIP MEETING RULES AND REGULATIONS, Paragraph 2:

“Proposals or matters relating to the conduct of the business affairs of the Corporation, if brought before a Membership meeting, shall be referred to the Board for study. Such matters, being solely within the powers delegated to the Board in accordance with the laws of the State of Arizona and Corporate Documents, will be considered only as a recommendation to the Board.”

 

[Josh Martin]

On 4/1/2022 at 10:51 AM, Tomm said:

Question: Does the following Bylaw conflict with the corporations articles of incorporation because it doesn’t allow the Members to vote on amendments or motions at their own Annual Membership meeting? It’s my contention that to prevent the Members from voting the above article should have read, “The Bylaws may be amended, modified, revised, or revoked by the Directors or by the Members in accordance to Article IV, Section 4 of the Bylaws…”. 

Bylaw, Article IV, SECTION 4: MEMBERSHIP MEETING RULES AND REGULATIONS, Paragraph 2:

“Proposals or matters relating to the conduct of the business affairs of the Corporation, if brought before a Membership meeting, shall be referred to the Board for study. Such matters, being solely within the powers delegated to the Board in accordance with the laws of the State of Arizona and Corporate Documents, will be considered only as a recommendation to the Board.”

This is ultimately a question for the society to resolve for itself. With that said, and with the understanding that what follows is based upon incomplete excerpts (and most certainly is not legal advice)...

I would first note that the relevant provision of the Articles of Incorporation relates solely to amending the bylaws. So to the extent that Article IV, Section 4 is applied to items other than amending the bylaws, there is no conflict.

As to whether there is a conflict in regard to amending the bylaws, I'm still not sure there is a conflict - rather, it may be that the relevant provision of the bylaws has been misinterpreted in the past. The bylaws provide that "Proposals or matters relating to the conduct of the business affairs of the Corporation... shall be considered only as a recommendation to the Board." While there is no doubt that "business affairs of the Corporation" is quite broad, my general understanding is that this term does not include amending the bylaws.

So my interpretation of the limited facts provided here would be that the membership has no power to do anything at a meeting of the membership except: 1) amend the bylaws, 2.) make recommendations to the board, and 3.) such other powers specifically granted to the membership elsewhere in the articles or bylaws.

I must reiterate once again that you and your allies in the society would be best served by hiring a professional parliamentarian and/or an attorney to fully review your governing documents and applicable law and provide thorough, professional advice in this matter.

Edited April 1, 2022 at 04:16 PM by Josh Martin

[Gary Novosielski]

On 4/1/2022 at 11:51 AM, Tomm said:

 

Arizona Revised Statutes:

10-3206. Bylaws

A. The board of directors of a corporation shall adopt initial bylaws for the corporation.

B. The bylaws of a corporation may contain any provision for regulating and managing the affairs of the corporation that is not inconsistent with law or the articles of incorporation.

10-3721. Voting entitlement generally

A. Unless the articles of incorporation or bylaws provide otherwise, each member is entitled to one vote on each matter voted on by the members. A member is entitled to vote only on those matters expressly provided in the articles of incorporation or bylaws.

B. Unless the articles of incorporation or bylaws or written agreement signed by the subject members and delivered to the corporation provide otherwise, if a membership stands of record in the names of two or more persons, those persons' acts with respect to voting shall have the following effect:

1. If only one votes, the act binds all.

2. If more than one votes, the vote shall be divided on a pro rata basis.

Our Corporations Articles of Incorporation Article VIII, paragraph 4 states: "The Bylaws may be amended, modified, revised, or revoked by the Directors or by the Members. In the event of conflict concerning the Bylaws as amended, modified, revised, or revoked by the Directors, the action of the Members shall prevail."  

Question: Does the following Bylaw conflict with the corporations articles of incorporation because it doesn’t allow the Members to vote on amendments or motions at their own Annual Membership meeting? It’s my contention that to prevent the Members from voting the above article should have read, “The Bylaws may be amended, modified, revised, or revoked by the Directors or by the Members in accordance to Article IV, Section 4 of the Bylaws…”. 

Bylaw, Article IV, SECTION 4: MEMBERSHIP MEETING RULES AND REGULATIONS, Paragraph 2:

“Proposals or matters relating to the conduct of the business affairs of the Corporation, if brought before a Membership meeting, shall be referred to the Board for study. Such matters, being solely within the powers delegated to the Board in accordance with the laws of the State of Arizona and Corporate Documents, will be considered only as a recommendation to the Board.”

 

I am not a lawyer at all, much less an Arizona lawyer, so I can't interpret the statute for you.  But if there is some language in it saying that some or all matters are solely within the powers delegated to the board, that language does not seem to be in the portion you quoted.  and the quote from  IV;§4(2) of your bylaws does not give any citation that would help identify that provision.

I can say that according to the principles of interpretation in RONR, a specific rule supersedes a general rule.  So if there is a general rule on handling routine business that says, for example, that a majority vote is required to adopt a motion, but there is a specific rule that, for example, a bylaws amendment requires a two-thirds vote, the specific rule overrides the general rule.