The New D.C. Nonprofit Corporation Act Takes Effect On Jan. 1, 2012: Everything You Need To Know To Comply

The coming New Year will soon usher in a new legal landscape for District of Columbia nonprofit corporations. On January 1, 2012, the new District of Columbia Nonprofit Corporation Act of 2010 goes into effect. To ensure that your organization is ready to comply, now is the time to review your organization's articles of incorporation, bylaws, and governance policies and practices for any necessary changes.

As a general rule, the 2010 Act provides D.C. nonprofit corporations with considerable flexibility to structure their corporate governance, and for the most part will not require changes to day-to-day operations. However, numerous default rules have changed under the 2010 Act and new, more detailed provisions governing matters like director standards of conduct and liability, indemnification, member voting rights and ballot voting procedures, and numerous other topics require D.C. nonprofit corporations to familiarize themselves with the new law, and determine whether changes to their governing documents or practices will be necessary to comply. The following highlights many of the significant changes that are in store.

GENERAL PROVISIONS AND APPLICABILITY

Location of General Provisions (D.C. Code, Title 29, Chapters 1 and 4)

The new Business Organizations Code—Title 29 of the D.C. Code—is a hub-and-spoke structure. Chapter 1 of the Code contains one set of general provisions and definitions that govern all business organizations in the District on matters such as filing of corporate reports and requirements for registered agents. Separate chapters then govern matters unique to each type of business entity. Nonprofit corporations must look to Chapter 1 of Title 29 for important general provisions and definitions and to Chapter 4 for the rules specifically applicable to nonprofit corporations. Biennial Reports Filing Deadline (D.C. Code § 29-102.11)

Biennial reports will now be due every two years on or before April 1 instead of January 15. According to unofficial agency guidance, organizations should continue to follow their existing two-year cycle for filing the biennial report, and should simply begin using the new April 1 filing deadline in the year their report is due (i.e., organizations that last filed in January 2010 have until April 1, 2012 to file their next-due biennial report). Corporate Records (D.C. Code §§ 29-413.01 to .05)

The new law specifies expanded record-keeping requirements for D.C. nonprofit corporations and permits such records to be kept in digital form. Minutes of all meetings of and records of all actions taken by the board, members, and any designated body must be maintained permanently. Appropriate accounting records and membership lists must be maintained. Additionally, numerous records must be maintained at the corporation's principal office, including the articles, bylaws, minute books for the most recent three years, all formal notices or other communications to members for the most recent three years, a current list of the names and business addresses of the corporation's directors and officers, and a copy of the corporation's most recent biennial report. "Old Act" Corporations (D.C. Code §§ 29-107.01(b); 414.01)

The new law appears to be intended to phase out so-called old act corporations—those incorporated in the District prior to the 1962 enactment of the District of Columbia Nonprofit Corporation Act. See D.C. Council Committee on Public Services and Consumer Affairs, Committee Report on Bill 18-500, at 18 (explaining that § 29-107.01 "includes a provision designed to phase out 'old-Code' corporations"). Technically, old act corporations have two years from the new law's applicability date in which to file a notice with the District that includes the corporation's articles of incorporation or other public organic record and the names and street addresses of its current directors and officers. Any old act corporation that fails to provide the required notice within the required time period shall be thereafter barred from asserting that it is not subject to the requirements of the new law. However, despite this provision, any old act corporation that desires to do business in the...