bylaw interpretation a question on bylaw interpretation

[Al Dunbar]

This question is not specifically about rules of order, I just think that some people in this forum would have had significant experience in interpreting bylaws, and be likely to help us resolve the ambituity.

My question is: how would the following bylaw be understood based on related practice and common English usage?

"The Society’s books, accounts and records shall be audited at least once each year by a duly qualified accountant or by two members of the Society appointed for that purpose at the AGM."

There currently are differences of opinion on whether or not this wording implied that, like the "two members of the Society", the "duly qualified accountant" needed to be appointed by the society. We cannot determine what the intention was when this bylaw was first adopted.

in favour of assuming YES:

This might be less likely to result in dissention than a professional auditor being appointed by the board, as some members might feel their input was required.

In favour of assuming NO:

two members of the Society are not members because of their accounting abilities, so appointing them at the AGM spreads the liability of them not doing a good job of the audit beyond just the board. The liability of a professional accountant doing an incompetent job would be covered by their professional association and related insurance. It seems unlikely that the appointment of a professional accountant by the board would be necessary from a liability standpoint.

 

And a follow-up question: what wording of the bylaw in question would make either option (YES or NO) acceptably unambiguous?

Thanks in advance for any comments, and please let me know if this is perhaps somewhat out of the scope of questions for this forume.

Edited September 18, 2023 at 09:30 PM by Al Dunbar
minor addition of text for clarification

[Joshua Katz]

According to RONR, the board has only such powers as it is given in the bylaws. Whether the duly qualified accountant must be selected by the AGM is ambiguous, but there's no bylaw I've seen authorizing the board to do it, so it seems to me that the answer is the AGM does it.

On 9/18/2023 at 5:28 PM, Al Dunbar said:

And a follow-up question: what wording of the bylaw in question would make either option (YES or NO) acceptably unambiguous?

 

 

On 9/18/2023 at 5:28 PM, Al Dunbar said:

"The Society’s books, accounts and records shall be audited at least once each year by a duly qualified accountant or by two members of the Society appointed for that purpose at the AGM."

 

For AGM:

The Society's books, accounts, and records shall be audited at least once each year by a duly qualified accountant, or by two members of the Society, either of which shall have been appointed by the Society for that purpose at the AGM.

For the board:

The Society's books, accounts, and records shall be audited at least once each year by a duly qualified accountant selected by the board, or by two members of the Society appointed for that purpose at the AGM.

[Gary Novosielski]

How would the society make a decision to hire a particular qualified firm, if not by a vote?  The decision of whether to use a firm or to use a committee of two is also a matter the society has to decide.  All these decisions are matters for consideration by motions and votes.

As for liability, that's a matter for discussion with an attorney familiar with such matters.  In my non-professional opinion, any attempt to finesse the legal liability is, I think, likely to fail, as the membership ultimately will approve the auditor's report and thereby assume responsibility for what's in it.

[Joshua Katz]

On 9/18/2023 at 8:38 PM, Gary Novosielski said:

How would the society make a decision to hire a particular qualified firm, if not by a vote?  The decision of whether to use a firm or to use a committee of two is also a matter the society has to decide.  All these decisions are matters for consideration by motions and votes.

 

I took the question to be whether the board could do it.

[Josh Martin]

On 9/18/2023 at 4:28 PM, Al Dunbar said:

There currently are differences of opinion on whether or not this wording implied that, like the "two members of the Society", the "duly qualified accountant" needed to be appointed by the society. We cannot determine what the intention was when this bylaw was first adopted.

"The Society’s books, accounts and records shall be audited at least once each year by a duly qualified accountant or by two members of the Society appointed for that purpose at the AGM."

Assuming that this sentence is the entirety of what the bylaws say on this matter, I would interpret the phrase "appointed for that purpose at the AGM" as applying to both the "duly qualified accountant" and the "two members of the Society." The wording is, however, ambiguous, and it will ultimately be up to the organization to interpret its own rules.

On 9/18/2023 at 4:28 PM, Al Dunbar said:

In favour of assuming YES:

This might be less likely to result in dissention than a professional auditor being appointed by the board, as some members might feel their input was required.

In favour of assuming NO:

two members of the Society are not members because of their accounting abilities, so appointing them at the AGM spreads the liability of them not doing a good job of the audit beyond just the board. The liability of a professional accountant doing an incompetent job would be covered by their professional association and related insurance. It seems unlikely that the appointment of a professional accountant by the board would be necessary from a liability standpoint.

Well, these seem like good arguments why one or the other of these rules may be preferable on the merits, but I don't think either of these arguments has anything to do with interpreting what the existing rule means. I think what would be more helpful for the society in that regard would be, in addition to looking at the language of the rule itself, to look at other provisions in the bylaws pertaining to finances and to the authority of the board.

On 9/18/2023 at 4:28 PM, Al Dunbar said:

And a follow-up question: what wording of the bylaw in question would make either option (YES or NO) acceptably unambiguous?

I concur with the wording proposed by Mr. Katz.

Edited September 19, 2023 at 02:04 AM by Josh Martin

[Atul Kapur]

On 9/18/2023 at 8:35 PM, Joshua Katz said:

For AGM:

The Society's books, accounts, and records shall be audited at least once each year by a duly qualified accountant, or by two members of the Society, either of which shall have been appointed by the Society for that purpose at the AGM.

I'm not a fan of "either" because there may be confusion about whether that means either of the two members.

How about 

The Society must appoint at every AGM either (i) a duly qualified accountant, or (ii) two members of the Society to audit the Society's books, accounts, and records for the [current/previous/next] year. The accountant or two members must report the results of the audit by the [date] meeting.

[Gary Novosielski]

On 9/18/2023 at 9:04 PM, Joshua Katz said:

I took the question to be whether the board could do it.

Right.  I think the context in the bylaws implies that, whoever is appointed to audit would report to the membership, so if I were a member I would want the board's involvement to be minimal.  

Edited September 19, 2023 at 03:44 AM by Gary Novosielski

[Joshua Katz]

On 9/18/2023 at 10:12 PM, Atul Kapur said:

The Society must appoint at every AGM either (i) a duly qualified accountant, or (ii) two members of the Society to audit the Society's books, accounts, and records for the [current/previous/next] year. The accountant or two members must report the results of the audit by the [date] meeting.

Works for me.

[Gary Novosielski]

I think RONR anticipates that the audit report will be submitted for adoption at the AGM.  Perhaps, like a nominating committee appointed at the AGM, their intended reporting time is at the next AGM?

[Shmuel Gerber]

On 9/18/2023 at 5:28 PM, Al Dunbar said:

My question is: how would the following bylaw be understood based on related practice and common English usage?

"The Society’s books, accounts and records shall be audited at least once each year by a duly qualified accountant or by two members of the Society appointed for that purpose at the AGM."

There currently are differences of opinion on whether or not this wording implied that, like the "two members of the Society", the "duly qualified accountant" needed to be appointed by the society. We cannot determine what the intention was when this bylaw was first adopted.

Because of that second "by", I think the only reasonably grammatical interpretation is that "appointed for that purpose at the AGM" modifies only the phrase "two members of the Society".

This could be made much clearer by reversing the order of the wording: 

"The Society’s books, accounts and records shall be audited at least once each year by two members of the Society appointed for that purpose at the AGM or by a duly qualified accountant."

However, this might be taken to imply that the accountant is the less preferred option. 

[Gary Novosielski]

I think a comma after Society would also work.

Edited to add:

Well, depending which way you wanted to take it.

Edited September 19, 2023 at 11:31 PM by Gary Novosielski