Depending on the status of the not for profit corporation under applicable tax or corporate legislation (eg. charitable/not for public benefit etc), the members may be required to appoint a stated percentage of independent directors, or may be prevented from appointing more than a maximum percentage of employees as directors of the corporation.
In Australia, the government plans to force not for profit ”super funds” in the superannuation sector to appoint one third of the trustee boards with independent directors, including an independent chair. The super funds are pushing back on this proposal, while other sectors of the economy are arguing that the majority of directors should be independent, not just one third.
Takeaway:
- Non profit organizations should keep up to date on relevant legislation to ensure compliance with any restrictions on the composition of the Board of Directors.