BY-LAWS AMENDMENTS

As denominations and even churches grow in economic reach sometimes they will spawn non-profit corporations intended to be parachurch organizations. Typically, the mission of the parachurch organization is to achieve a charitable purpose that is part of the mission of the church or denomination. However, the church or denomination usually wishes to retain some control over the parachurch organization and its assets to assure that the church or denominational charitable goals are met. Also, control is sought such that when the mission has been fulfilled, or changes, the assets revert to the church or denomination. Sometimes the economic efficiency gained by creation of the parachurch organization is lost due to changes in society. What was once strictly charitable might be provided by for-profit entities that previously did not exist. The solution may be liquidation of the parachurch organization and redistribution of its assets to other parachurch organizations or reversion. The solution may require, however, that economic efficiency be improved by merger. In order to achieve a merger, a parachurch organization may need to be restructured so that it no longer is part of the church or denomination.

In Episcopal Church Diocese of California v Episcopal Senior Communities, Slip Op. (Cal. App. 2020), the parachurch organization to maintain economic viability needed to merge with another non-profit not affiliated with the parent denomination. The merger considered was not consummated for several years. One of the efforts manifested in a side agreement entered into that purported to allow the parachurch organization to make changes to its bylaws so as to effectuate a future merger. Unfortunately, the side agreement required the parachurch organization’s board of directors to be composed of a majority of members drawn from the denomination. But, the bylaws permitted amendment by “super majority” vote. Thus, the two governing documents would be in conflict if a super majority voted to amend to eliminate the requirement of a denominational majority on the board. The litigation resulted because that was exactly what happened. The denomination expended 147 pages of briefing and the appellate court ruled in 48 pages. The appellate court resolved the clash of the documents by affirming the decision to permit the bylaws amendment eliminating the required denominational majority on the board.

The power to amend bylaws by a parachurch organization must be carefully prescribed by the church or denomination. Such restrictions on the power to amend should not be lifted without considerable consideration of possible outcomes. In order to survive, and especially to avoid reversion of assets to the church or denomination in a liquidation, parachurch organizations may seek to amend their bylaws to eliminate reversionary clauses or governance clauses. The will to survive economically or to achieve the charitable purpose even if it can no longer be achieved using only church or denomination resources, or driven by the needs of parachurch organization officers to retain employment, may override loyalty to a church or denomination.

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