New Requirements for Nonprofit Corporations

Public Act 222 of 2008, effectiveJuly 16, 2008, amended the Nonprofit Corporation Act.  The amendment includes new requirements for nonprofit corporations.

Section 505 of the act has been amended to require the board of directors of a nonprofit corporation consist of at least 3 directors.   Michigan nonprofit corporations in existence on July 16, 2008,  must have a board consisting of 3 or more directors by January 16, 2009.  For nonprofit corporations formed after July 16, 2008, the initial board of directors, and subsequent boards, must consist of  3 or more directors.

An existing nonprofit corporation with only 1 or 2 directors will need to increase the size of the board to at least 3 directors.  If the corporation's bylaws fix the size of the board at less than 3 directors, the bylaws will need to be amended.   In accordance with its bylaws, a nonprofit corporation may elect additional directors at its annual meeting or a special meeting called by the board.

Section 922 of the act has been amended to add a new subsection 2.  The new subsection requires a "charitable purpose corporation" to provide notice of the dissolution to the Attorney General within 60 days of an automatic dissolution under section 922.  The dissolved charitable purpose corporation is required to obatin written approval from the Attorney General before disposing of any of its assets.  A nonprofit corporation is automatically dissolved under section 922 if it fails to file the annual report or pay the annual fee within the 2 years of the due date of the report.  A definition for the term "charitable purpose corporation" has been added to section 106(1) of the act

Legislative history and bill analysis is available on the Legislature's website.  http://legislature.mi.gov/doc.aspx?2008-HB-5681