non-profit
How to prevent non-profit from being taken over?
<p>I am a board member of a very small non-profit (we have about 15-20 members). I have heard a real life story about how a non-profit similar to ours was taken over.</p>
<p>A few &quot;new members&quot; joined that non-profit, invited a whole bunch of &quot;friends and family members&quot; to join as well, and when elections came those &quot;friends and family&quot; all voted for these &quot;new members&quot;, which became new board members and changed the non-profit for worse. It was a purposeful take over. <strong>Edit (additional info)</strong>: These &quot;friends and family&quot; did not exercise their own free will in voting process; they were told by &quot;new members&quot; to vote for them (for the sole purpose of &quot;take over&quot;), which they did because they are &quot;friends and family&quot;.</p>
<p>How can we prevent a similar scenario happening to us?</p>
<p>We were thinking of only allowing people to vote after they were a member for like a year or two, but that could only delay the &quot;take over&quot;. Is there a better solution?</p>
<p><strong>Update</strong> - more details on how we accept members.<br />
Currently anyone can join as a member. It's just a matter of &quot;new member&quot; meeting with one of our Board Members (BM), signing a bit of paperwork, signing up for PayPal auto-pay (there is monthly membership fee) and BM giving out an RFID card for access. We are currently working on improving this model to be more safe. If you have ideas on how we can improve this on-boarding model that could help solve the &quot;take over&quot; problem please share your suggestions as well.</p>
<p>To answer this question in comments:</p>
<blockquote>
<p>are there criteria</p>
</blockquote>
<p>currently we don't have any criteria. However, if there would be criteria they would be something like &quot;don't join our non-profit to steal things or to take over, or stuff like that&quot;. So, essentially, the nature of our non-profit is that anybody can join. The problem is <strong>filtering out people with bad intentions</strong>.</p>

<h2>That isn’t a “takeover”</h2>
<p>Most importantly because not-for-profits do not exist as financial vehicles for their <em>owners</em>, they are a resource of the community for the benefit of their <em>members</em>, both current and future - that’s why they get tax concessions.</p>
<p>Further, what you describe isn’t a takeover, it’s the members of an organisation expressing their democratic rights to have the organisation run by the people they choose to run it.</p>
<p>The correct response from an ex-board member in this situation is to congratulate the winners, wish them luck, and offer them whatever transitional and ongoing support they can in the best interests of the organisation. A board member has a fiduciary duty to act in the best interests of the <em>organisation</em> irrespective of their personal feelings and desires. You can disagree with the direction a new board is taking an organisation but that’s their call, not yours.</p>
<p>Indeed, many not-for profits benefit, some even need, renewal at the board level. A junior sports club needs to be run by the parents of the children playing now, not those who played 30 years ago.</p>
<h2>What can you do?</h2>
<p>There are a number of things that can be done, however, given the fiduciary duty the directors owe to the organisation, some of these are … problematic to outright illegal. The list below is arranged from least problematic to least most problematic.</p>
<ol>
<li>Get big. The Red Cross and Amnesty International don’t have to worry about this because they have so many members that a small clique can’t gain control.</li>
<li>Restrict membership. The organisation exists for a purpose, it is perfectly legitimate to restrict membership to people who are actively pursuing that purpose. For example, returned services organisations can legitimately restrict voting members to those who served overseas on active duty. Similarly, sporting clubs can legitimately restrict voting membership to those (or the parents of children) who are actively playing or coaching the sport.</li>
<li>Stagger board elections. Board members serve for 2 years and only half the board is up for election at each AGM. Local law may prohibit this but it does provide for greater stability generally.</li>
<li>Create executive positions that aren’t elected. For example, there can be an executive role for “past-Presidents” or Guardians who are appointed for a long-term, possibly life. Such roles legitimately create corporate memory and incidentally guard against the type of rapid turnover you are worried about. However, depending on local law, this might be illegal.</li>
<li>In some jurisdictions, companies can set up <a href="https://en.wikipedia.org/wiki/Shareholder_rights_plan" rel="nofollow noreferrer">poison pills</a> to enhance the rights of existing shareholders over the rights of future shareholders. However, these are not legal in the UK for example and do not apply to the type of organisation you describe which has members rather than shareholders. Even if it is legal, such structures are often not suitable for not-for-profits as they may be ineligible for tax exemption, charitable status or to be tax-deductible gift recipients.</li>
</ol>
<p>Before doing anything, get legal advice.</p>

<p>Some non-profits assign some or all powers to a self-perpetuating board of directors, or assign some or all board seats to <em>ex officio</em> members of the board who gain their positions by virtue of appointment by someone else (e.g., the &quot;Ivy League Academic Standards Association&quot; might have a board made up of the Provost of each member institution).</p>
<p>Another common example of this is an Homeowner's Association whose members <em>ex officio</em> are the owners of the units in the HOA's development.</p>
