It is imperative that not-for-profit groups clearly define in their constitution who their members are, under what conditions they become a member and under what conditions they get a vote.
Equally, your organisation should clearly articulate when people cease to be a member and/or do or don't get a vote. This can help prevent disputes at the Annual General Meeting, or as the example below demonstrates, prevent you from being left high and dry in the event of a Special General Meeting.
Considering a merger can help many not-for-profit organisations continue to secure and pursue their mission. But it is important to ensure your constitution - particularly in regards to membership - is in order before you dive straight in.
Take the following scenario for example. Two sporting organisations are considering a merger. One group has completed a SGM and voted in its favor. However, while the other was preparing to consider the proposal, its board was informed that all memberships had lapsed under its constitution as it had already held its AGM. The constitution stated that "each Ordinary Membership shall be valid from the date the Ordinary Membership is issued until the following Annual General Meeting of the Club".
Effectively, the organisation was left with no members to vote on the merger. Being a seasonal sporting club, most members would be unlikely to renew their membership until the new season approached, even if renewal notices had already been sent. This meant that there would be very few (if any) financial members who could vote on the motion based on the membership clause in this constitution.
Importantly, this could be played out in many seasonal sporting clubs, as well as other non-sporting, member-based organisation.
At the AFL level, the Hawthorn Football Club has a clause in its constitution that at face value may allow board members to determine a different membership period than is specified. However, it is likely that this ability would be challenged in a contentious situation or dispute.
3.6 Period of Membership
Other than as determined and specified by the directors, each Ordinary Membership shall be valid from the date the Ordinary Membership is issued until the following annual general meeting of the Club.
Have you checked what membership clauses are in your constitution? Are you protected?
What are the issues?
- If a constitution does not define the membership term, in most jurisdictions it defaults to a financial year basis.
- If it is based on a financial year and you hold your Annual General Meeting after June 30 - which the vast majority of not-for-profit organisations do - you will need to specify that those who were financial members prior to June 30 are still eligible to vote at the AGM.
- But what if you want to hold a Special General Meeting in December and you are a junior soccer club whose season is now in hiatus? Who are your financial members? It is likely that you will have very few and will need to consider who else may be eligible to vote. Could your life members outvote the few that remain current financial members?
What should we do?
- Clearly define your membership structure, who is eligible to vote and under what conditions.
- Clearly articulate the term of membership in your constitution.
- Clearly state when a membership lapses. A membership may lapse, for example, if members do not pay their fees within a specified number of days or weeks from the date of renewal. But be sure to define exactly what you mean by 'lapsed' - will people who have not paid be struck off the members' register or ineligible to vote?
- It is far more practical for seasonal memberships to align closely to the actual season. For example, a membership term for winter sports such as football may run from February to February, or October to October for summer sports like cricket.
- If your memberships are free, clearly articulate that if a member cannot be contacted or otherwise fails to renew their membership, it will lapse. If you do not do this it can become extremely difficult to keep your members' register up to date (and know who is actually voting), or to get a majority vote where that is required.