New nonprofit law effective Jan. 1

The Texas Business Organizations Code becomes effective Jan. 1. A part of the code, the Texas Non-profit Corporation Law, will control churches that are incorporated. The law affects such things as the rights of the members and how the church conducts business meetings.

The change in the law became effective for all corporations created after Jan. 1, 2006. Corporations created before that date have the choice of becoming controlled by the law at any time or waiting to become controlled by the code on Jan. 1.

Prudence will require incorporated churches to have an attorney review the church’s articles of incorporation, now called “certificates of formation,” and the church’s bylaws, to make certain those documents are synchronized with the new law. Some churches have a “constitution.” The constitution of a nonprofit corporation is considered part of the “bylaws” in the law.

Baptist churches are either nonprofit corporations or unincorporated nonprofit associations. The congregation should consult with an attorney as it determines which of these entity forms is better for a given church.

State law dictates in greater detail how a corporation conducts its business. That has its advantages in that the church is likely to have greater clarity in how it is to go about its business. It may have disadvantages in that the congregation will need to be aware of those statutory rules and not run afoul of them. Well-drafted corporate documents should solve that problem, however. Those documents will reflect the statutory rules. Generally, the larger the church is the more likely it will conclude it should incorporate.

While the law gives churches considerable latitude when it comes to establishing the bylaws and other rules for governing the legal affairs of the church, the law will trump any provision in the church’s articles, bylaws, constitution, or elsewhere that are inconsistent with the law. Therefore, in order for the church to know that it is acting in accordance with the law when it follows its articles and/or bylaws, it must know that those documents are consistent with the law.

If a comparison of a church’s articles and bylaws with the requirements of the new code indicates some amendments are necessary, the church will need legal guidance on how to accomplish those amendments. Amendments to the articles of incorporation must be filed with the Secretary of State.

A lawyer who practices in the area of nonprofit corporations can assist the church in making those decisions and in getting the legal documents in order.

?James P. Guenther is legal counsel for the Southern Baptists of Texas Convention.

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