Date: Dec 20, 2011
The District of Columbia has overhauled its Business Organizations Code, Title 29 of the D.C. Code ("Code"), effective July 2, 2011. The new provisions will apply as of January 1, 2012, unless entities elect to be governed by old Title 29 ("Old Code"), as described below. These modifications present potential challenges to, and opportunities to revisit, the operational structure of nonprofits and for-profits organized in D.C., as the Old Code is being replaced.
For certain D.C. entities, part of the challenge will be to decide whether or not to be governed by the new Code. Nonprofits established before August 6, 1962, and other entities formed before June 8, 1954, may elect to continue complying with the Old Code. Notice of such election must be given on or before January 1, 2014. If notice is not provided prior to that date, the entity will automatically be subject to the new Code. Entities formed after those dates do not have a choice and must comply with the new Code.
Whether or not such an election is available, entities should review their Articles of Incorporation ("Articles"), Bylaws, and other operational documents to determine whether the Code's new default provisions:
(a) will affect actions taken under existing organizational or operational documents in such a way as to invalidate such action(s); or
(b) should be, or are already, superseded by the governing documents.
In addition, for entities doing business in D.C. as a foreign corporation, the Code provides for a domestication process, thus streamlining and simplifying the process for an entity to transfer its jurisdiction of incorporation to D.C.
The new Nonprofit Corporation Act ("Act"), a subpart of the Code, substantially revises the D.C. nonprofit laws. The remainder of this document focuses on the important differences between the Act and the Old Code that may affect how your nonprofit operates.
The following changes apply solely to nonprofits having members, and each may be superseded by the Articles or Bylaws unless otherwise specified:
BOARD AND OFFICER PROVISIONS:
The following changes apply to the nonprofit's Directors and Officers:
Amendments to Articles and Bylaws
For more information on these changes and whether your entity should revise its organizational or operational documents, please contact:
Tracy P. Marshall (202.434.4234; email@example.com)