When forming your Hawaii nonprofit corporation, the Hawaii Nonprofit Corporations Act requires that the corporation’s articles of incorporation specify whether or not the corporation will have members. A member is similar to that of a shareholder of a for-profit corporation in that he/she has rights and obligations of membership pursuant to the corporation’s articles of incorporation or bylaws.
Members may elect the board of directors as well as vote on major corporate changes such as amendments to the articles of corporation, mergers, dissolution and similar matters. However, a member does not hold any shares in a Hawaii nonprofit corporation. Although having members in a Hawaii nonprofit corporation would make it similar in structure to a for-profit corporation in which the directors are elected by the shareholders and therefore there is some accountability on the part of the directors to the shareholders, a nonprofit corporation with no members does not have the deal with the difficulties and inconveniences that may arise if members are involved in the voting process.
For example, the Hawaii Nonprofit Corporations Act requires that, for corporations with members, any amendment to the articles of incorporation must be adopted by two-thirds of the members who are present at an annual or special meeting. However, it may be difficult to achieve the requisite quorum for member action or approval especially if the corporation has a large number of members.
Furthermore, there may be members who did not attend such meeting that may challenge the corporation’s amendment due to a lack of notice. Contrast those hurdles when a corporation has no members. Only a majority vote of the board of directors is needed to amend the corporation’s articles of incorporation.
As you can see there are a number of issues that you’ll need to consider when forming your Hawaii nonprofit corporation.
Contact our offices now so we can help guide you through this process.
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