Emergency Bylaws May Help
Both the Oregon and the Washington Nonprofit Corporations Act have a little known provision that may be helpful as our communities struggle with the effects of the COVID-19 outbreak: Emergency Bylaws. Both Oregon and Washington nonprofit corporations are authorized to create emergency bylaws allowing them to operate in case of an emergency. ORS 65.064 provides that an emergency exists “if a quorum of the corporation’s directors cannot readily be assembled because of some present or imminent catastrophic event.” The Washington counterpart at RCW 24.03.070 incorporates the “for-profit” statute at 23B.02.070, which similarly defines an emergency as the inability of the board to meet because of a catastrophic event.
While “catastrophic event” is not defined in either statute, I personally feel that there is little doubt that the global pandemic associated with the COVID-19 virus qualifies. Both statutes emphasize that the purpose of emergency bylaws is to allow the board to “make all provisions necessary for managing the corporation during the emergency” and then list such things as procedures for calling board meetings, quorum requirements and designation of additional or substitute directors. Thus, while the scope of the emergency bylaws should be relatively narrow, the intent is clearly to allow changes to the usual procedures so that the nonprofit corporation can continue to function. Allowing electronic notice, virtual meetings, and scheduling of annual meetings for dates other than those prescribed by the regular bylaws are all issues that are reasonably within the scope of the emergency bylaws. Common economic remedies being considered by many of our clients, such as waiver of late fees or interest on assessments or deferment of COVID-related foreclosures are not specifically referenced by the statute, but depending a community’s risk tolerance, the board may want to consider a more robust set of emergency bylaws to address these issues. Notably, both state’s statutes provide some protection from liability for boards choosing to promulgate and operate in accordance with emergency bylaws.
There is some question of whether condominium and homeowner association boards can take advantage of these provisions because of language in the Condominium and HOA Acts that proscribe bylaw contents and there may even be specific language in your Association’s articles of incorporation or other governing documents that prohibit the creation of emergency bylaws, so we definitely recommend consulting with your community’s attorney to see if emergency bylaws can be employed to help your communities operate during this “catastrophic event.” Stay healthy!