In January 2015, Governor Snyder signed Michigan Senate
Bills 623, 624, and 929, which make significant revisions to the Michigan
Nonprofit Corporation Act (MCL 450.2101-450.3192) (the “Act”). The purpose of
these companion bills is to clarify and modernize the law governing nonprofit
corporations that conduct activities in Michigan; indeed, the revisions
constitute a major overhaul of the Act and provide increased flexibility for
creating and governing nonprofit corporations. Among the numerous changes, the
following major revisions may need to be addressed or incorporated into
governing procedures or organizing documents:
1. Indemnification
and Liability
The Amended Act revised and expanded upon provisions
concerning the indemnification of a director, officer, employee, non-director
volunteer, or agent, who is or is threatened to be made a party to a civil,
administrative, or criminal suit or proceeding. In addition, a nonprofit may
now amend its articles of incorporation to contain a provision limiting or even
eliminating a director’s liability to the nonprofit corporation, its members,
or its shareholders (except for intentional wrongdoing, such as an intentional
criminal act or intentional infliction of harm to the corporation or
shareholders).
Of particular importance, Section 209 provides that if an
entity’s articles of incorporation contain a provision eliminating volunteer
director or officer liability (filed before the effective date of the 2015
amendments), the existing provision automatically works to eliminate the
liability of a director or volunteer officer under Section 209(1)(c).
2. Mergers
MCL 450.4705a of the Amended Act now allows one or more
domestic nonprofit corporations and limited liability companies to merge. A
surviving or new corporation may use the same corporate name as the merged or
consolidated corporation. See MCL 450.2722. A nonprofit corporation organized
for charitable purposes, however, is restricted from merging (as well as
dissolving or converting) without the Attorney General’s consent. The
Department of Licensing and Regulatory Affairs will not file a certificate of
merger for a nonprofit organized for charitable purposes without a copy of the
written consent from the Attorney General’s office, or an affidavit that the
nonprofit corporation served the notice on the Attorney General and the
Attorney General’s office failed to respond within 45 days after filing with
the Department of Licensing and Regulatory Affairs.
3. Electronic Voting
and Notifications
In an effort to keep pace with electronic forms of
communication, the Amended Act allows for electronic voting on, and notice of,
various corporate matters. Now, participation in meetings via electronic
methods of communication is permitted by default, unless there is a provision
in the nonprofit’s organizing documents that prohibit such voting methods. This
opens the door for electronic voting or notifications through email, online
surveys or other polling venues; but this also means that nonprofit
corporations will need to address and prevent issues concerning identification
of members or shareholders voting through electronic mediums.
4. Learned Profession
Nonprofit corporations operating in Michigan may provide
“services in a learned profession” which includes services provided by a
dentist, a physician, a doctor of divinity or other clergy, or an attorney.
These revisions incorporate the Attorney General’s opinion that nonprofit
hospitals and other nonprofits may provide medical services through employed
physicians. In other words, the changes clarify from a statutory perspective
the industry understanding that nonprofits may employ and enter into other
arrangements with licensed or authorized professionals to provide services on
behalf of the nonprofit corporation.
The Act also provides nonprofits with the option to limit
access to information for shareholders and members. A nonprofit’s articles of
incorporation or bylaws can specify that there is no right to inspect in
certain instances, such as opening lists of donors would not be in the best
interests of the corporation. Other revisions, such as permissibility of
certain mergers and acquisitions, and restrictions on dissolving may be
applicable to your nonprofit. Nonprofit corporations should consider reviewing
and/or amending their respective governing procedures or organization documents
to take these significant revisions to the Michigan Nonprofit Corporation Act
into account.
