---
name: nonprofit-bylaws-policy
description: "Drafts and reviews nonprofit bylaws (membership structure, board size/terms, quorum, amendment procedure) and core governance policies: conflict-of-interest policy, whistleblower/non-retaliation policy, document retention and destruction policy, and related policy text (gift acceptance, joint venture, compensation-setting process). Use when asked to write or revise bylaws, draft a conflict-of-interest disclosure form and policy, write a whistleblower policy, create a document retention and destruction schedule, or run a bylaws compliance check against actual practice. Does not cover running board meetings or committees under existing bylaws (use nonprofit-board-governance), Form 990 filing itself (use nonprofit-form-990), or state charitable solicitation registration bylaws-adjacent requirements (use nonprofit-charitable-registration)."
license: MIT
metadata:
  supervision: "expert-required"
  supervision_note: "Bylaws are legally binding on the organization and controlled by state law."
  date_added: "2026-09-07"
  date_added_source: "git:1860ed47a83901ff5e6d45abc4a2ef05be8fd4cd"
---

# Nonprofit Bylaws & Core Policy Drafting

## When to Use This Skill

Use this skill to draft or revise the foundational legal/governance documents: bylaws and the
policies IRS Form 990 explicitly asks whether an organization has adopted. Trigger tasks include:
"draft bylaws for a new 501(c)(3)," "our bylaws say the board has 15 seats but we only have 7 — fix
the conflict," "write a conflict-of-interest policy and annual disclosure form," "we need a
whistleblower policy before our audit," "create a document retention and destruction schedule," or
"review these bylaws for compliance gaps."

Boundary: this skill produces the *documents*; operating within them day-to-day (running meetings,
committees, the ED relationship) is `nonprofit-board-governance`. Annual filing mechanics and public
disclosure of the 990 itself are `nonprofit-form-990`. State-by-state charitable solicitation
registration filings are `nonprofit-charitable-registration`.

## Bylaws: Required and Recommended Provisions

Bylaws are the organization's internal operating rulebook and generally control over informal
practice — if actual practice conflicts with written bylaws, the bylaws (or state law) govern until
formally amended. Core sections to include:

1. **Name, purpose, and mission reference** — should track the Articles of Incorporation, not
   contradict it; contradictions between Articles and bylaws are a common cause of IRS/state
   follow-up.
2. **Membership structure** (if any) — nonprofits are not required to have a legal "membership" class
   with voting rights distinct from the board; decide deliberately, since a formal membership
   structure adds real governance obligations (member meetings, member voting rights on certain
   actions) that most service-delivery nonprofits should not take on without a specific reason
   (e.g., associations, some advocacy coalitions).
3. **Board composition** — size (a fixed number or a range, e.g., "no fewer than 5 nor more than 15"
   avoids repeated bylaws amendments as the board changes size), qualifications, and any required
   seats (e.g., board chair of a fiscal sponsor, specific stakeholder seats).
4. **Terms and term limits** — length of term (commonly 2-3 years), maximum consecutive terms
   (commonly 2-3 terms before a mandatory one-year gap), and staggered terms so the whole board
   doesn't turn over in the same year.
5. **Officer roles** — Chair/President, Vice Chair, Secretary, Treasurer at minimum, with duties
   defined (e.g., Secretary certifies minutes and corporate records; Treasurer oversees financial
   oversight, works with staff on statements per `nonprofit-financial-statements`).
6. **Meetings** — frequency of required board meetings (many states set a statutory minimum, often
   annual at minimum), notice requirements, quorum (commonly a majority of seated directors, not
   "authorized" seats if there are vacancies — specify which), and whether virtual/electronic
   meetings and written consent-in-lieu-of-meeting are permitted.
7. **Voting** — simple majority default; name which actions require a supermajority (commonly bylaws
   amendments, removal of a director, dissolution, mergers) — check `nonprofit-mergers-fiscal-
   sponsorship` for merger process itself.
8. **Committees** — authorize the board to create committees and distinguish board committees
   (composed of directors, can hold delegated authority) from advisory councils (non-directors, no
   binding authority) if the organization uses both.
9. **Indemnification** — protects directors/officers acting in good faith from personal liability,
   generally paired with D&O insurance (see `nonprofit-risk-management`).
10. **Amendment procedure** — who can propose amendments, notice period, and vote threshold required.
11. **Dissolution clause** — required for 501(c)(3) status: on dissolution, remaining assets must go
    to another 501(c)(3)/governmental entity, never to private individuals — the IRS will not grant
    exemption without this clause.

### Common Bylaws Failure Modes

- Bylaws say one board size, actual practice is another (unamended after growth/shrinkage) —
  reconcile before any funder or auditor governance review.
- No stated quorum, or a quorum defined against "board seats" without clarifying vacant seats count
  against or are excluded from the total — ambiguity that stalls a vote's validity when challenged.
- No conflict-of-interest or indemnification clause cross-referenced, leaving the two documents
  inconsistent.
- Amendment procedure so burdensome (e.g., requires unanimous consent) that the bylaws become
  functionally unamendable and organizations start operating in violation of their own document.

## Conflict-of-Interest (COI) Policy

The IRS Form 1023 application and Form 990 (Part VI, Line 12) both ask whether the organization has
a written COI policy — adopt one even though it is not strictly statutorily mandated everywhere,
since its absence is treated as a governance red flag by funders, raters (e.g., Candid/GuideStar
seal levels), and the IRS itself.

1. **Definition section**: define "interested person" (directors, officers, key employees, and their
   family members/business entities) and "financial interest" broadly enough to catch indirect
   benefit (e.g., a vendor contract with a director's company).
2. **Disclosure duty**: require annual written disclosure from every director/officer/key employee,
   plus an ad hoc disclosure obligation the moment a new conflict arises (not just annually).
3. **Recusal procedure**: the interested person discloses, leaves the room for discussion and vote,
   and is not counted toward quorum for that vote — minute the recusal explicitly.
4. **Determination of fair/reasonable transaction**: the disinterested board members must
   affirmatively determine the transaction is fair and in the organization's best interest, using
   comparability data where relevant (ties directly to the IRS **rebuttable presumption of
   reasonableness** process for compensation — see `nonprofit-board-governance`'s ED evaluation
   section for that specific application).
5. **Annual disclosure form** — a standard one-page form every board/staff member covered signs
   yearly listing known financial interests, board/employment affiliations, and family relationships
   with vendors or grantees.

## Whistleblower / Non-Retaliation Policy

Not universally state-mandated for nonprofits, but required in some states (e.g., California for
orgs above a revenue threshold) and treated as a Form 990 governance-disclosure question elsewhere —
adopt regardless of jurisdiction as standard practice.

1. State the organization's commitment to legal/ethical conduct and prohibits retaliation against
   anyone reporting suspected fraud, financial impropriety, or legal/policy violations in good
   faith.
2. Provide at least one reporting channel *outside* the normal chain of command (e.g., board audit
   committee chair or an anonymous hotline/email) so a report about the ED or CFO has somewhere safe
   to go.
3. Name who investigates (audit committee is common) and commit to a defined timeline for
   acknowledgment and resolution.
4. Explicitly state that knowingly false reports are not protected, to prevent misuse, while making
   clear good-faith reports made without full certainty are protected.

## Document Retention and Destruction Policy

Required-in-substance because the federal Sarbanes-Oxley Act's document-destruction provision
(18 U.S.C. § 1519) applies to nonprofits too — knowingly destroying documents relevant to a federal
investigation is a criminal offense regardless of entity type; a written policy demonstrates
good-faith routine practice rather than post-hoc destruction.

1. Build a retention schedule table by document category with a specific retention period, e.g.:
   corporate records/bylaws/minutes/Articles (permanent); IRS exemption determination letter
   (permanent); financial statements and audits (permanent or 7+ years); tax/990 filings (permanent
   or per state, commonly 7 years minimum); employment/personnel records (7 years post-termination,
   longer for I-9s and payroll tax records per federal rules); grant agreements and related records
   (per the grant's own retention clause, often 3-7 years post-award-closeout — check individual
   agreements, especially federal awards under 2 CFR 200); donor records and gift agreements
   (permanent for named/restricted gifts, per `nonprofit-planned-giving` for legacy commitments);
   insurance policies (permanent while any related claim is possible).
2. Include an explicit **litigation/investigation hold** clause: normal destruction schedules are
   immediately suspended for any document relevant to pending or reasonably anticipated litigation,
   audit, or investigation — this clause is what makes the routine-destruction defense credible.
3. Name a records custodian/owner and specify both physical and electronic records (including email
   and cloud storage), plus secure destruction methods (shredding, secure wipe) rather than simple
   deletion.

## Standard Deliverables

- Full bylaws draft or redline of existing bylaws against current practice
- Conflict-of-interest policy + annual disclosure form
- Whistleblower/non-retaliation policy with named reporting channel
- Document retention and destruction schedule (table by document category)

## Practitioner vs. Advisor Framing

- **As the ED or board secretary**, run a practice-vs-bylaws reconciliation pass first (actual board
  size, actual quorum practice, actual committee structure) before drafting amendments, since the
  most common project is fixing drift, not writing from scratch; get every COI disclosure form
  signed annually with a hard deadline, not "as time allows."
- **As an advisor**, treat missing COI, whistleblower, and document retention policies as the fastest,
  lowest-cost governance wins to recommend to a client — they are heavily weighted in funder due
  diligence and 990 Part VI questions relative to the effort required to adopt them, and should
  usually be proposed before a full bylaws rewrite unless a specific defect (quorum ambiguity, term
  limit drift) is blocking a live decision.