An Administrator's Guide to California Private School Law

Chapter 2 - Governance

1. G ENERAL R EQUIREMENTS The general substantive requirements for a School’s corporate Bylaws are set forth in the Nonprofit Corporation Law, Corporations Code §§ 5151-5153 (public benefit corporations) and 9151-9153 (religious corporations). Bylaws must include the following:

 The number of directors of the School unless it is already stated in the Articles. This may be stated as a minimum and/or maximum number of directors. Each School must have at least one Director. 35

The Bylaws should also generally contain the following provisions:

 The time, place and manner of calling, conducting and giving notice of meetings of Members, Directors, and Committees.  The qualifications, duties, powers, and compensation (if any) of Directors.  The method, time for their election, and term length for Directors.  Quorum requirements for Directors and Committee meetings, and the

percentage of votes required for certain actions.  Whether the Corporation has a membership.

2. B YLAWS R ELATING T O D IRECTORS A ND M ANAGEMENT The law requires that a school incorporated as a nonprofit public benefit or religious corporation have a Board of Directors. It is under the Board’s collective direction that the school conducts its activities and affairs and exercises its corporate powers. The Board is the final authority of the private school and is charged with adopting and maintaining the school’s mission. The Board and the individual Directors act as fiduciaries to the school. A “fiduciary” relationship is one of good faith, confidence, and trust. For a public benefit corporation, the standard of conduct requires that a director act “in good faith, in a manner that director believes to be in the best interests of the corporation, and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.” 36 The standard is similar for a religious corporation. A director must act “with such care, including reasonable inquiry, as is appropriate under the circumstances.” 37 A fiduciary is under a duty to act primarily for the benefit of another on matters within the scope of the fiduciary relationship. The school cannot act on its own and relies upon the Board and Directors to act in its best interest. The Directors of a nonprofit owe fiduciary duties of care and inquiry, duty of loyalty, and a duty to comply with investment standards. The Board also serves as stewards of the school’s resources. It is imperative that Directors understand the school’s finances and actively participate in financial discussions. An active Board should be involved in fund development for the school.

An Administrator’s Guide to California Private School Law ©2019 Liebert Cassidy Whitmore 33