Event:2014/05/12 Delegates Check-in

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Updates

  • John initially seems okay with Sudo/BAPS moving stuff in in June
    • Jenny: If we can only move things in and cannot effectively use the space, it seems extremely reasonable to not have to pay rent for june.
  • Structural engineer scheduled for Wednesday/Thursday, would be good to have a shadow - 10-12:30ish
    • Matt: I recommend the Jake, jnny: or Hol? or Jordan?
    • Group: Contacting the Hol, accused of being an engineer ;)

ToDos:

Bylaws

Articles of Incorporation

Board of Directors

Temporary, appointed Board of Directors

  • Appointing the board (bylaws do not need to be concurred upon beforehand)

On-Going Delegation of Board of Directors

  • Specified in the Bylaws (above)

Federal Tax-exempt status 501(c)

Protocol:

  • Sorting projects into either of the following:
    • (i) it is a separate entity (i.e. a non-profit itself or a for-profit that isn't eligible for a tax exemption.) For each of these, there would be a sub-lease agreement. I will write up a sample.
    • (ii) it is a fiscally sponsored project. There should be at least 33% (and better 50% or more) of the income in this category in order for the organization to get tax exempt status. For each such project, there will be a Board Resolution designating the people running the project as a "project committee" with control over its own funds and the ability to decide who joins the committee and how it is run -- so in actual operation, the project will be independent of the umbrella corporation and have autonomy. For tax purposes, however, the income and expenses of project committees will be reported as the umbrella organization's income (i.e. Omni Oakland collective). I will write the board resolutions and we can discuss / I can provide more details.

Options:

  • Pursue independent 501(c) status with the federal government, specifically 501(c)3, education-based public benefit non-profit.
  • Pursue fiscal sponsorship with an existing 501(c), may or may not be seen as a temporary solution.
  • Could go for-profit **gasp!**

Registering with the attorney general

  • Can't happen until after the bylaws are adopted, but should be sent immediately as both are due after 30 days of registering assets.
  • Jesse will send the doc.

Misc. ToDos

  • Primer on corporate status options
  • add to agenda of next omni meeting to decide if/when to invite John and Mary to sudo, etc.

Notes from Jesse

As we discussed, I've attached proposed bylaws and proposed restated articles of incorporation (note: these are in the google drive, not attached to this email). These are preliminary documents and can be modified as necessary based on discussion with the group.

Articles of Incorporation

  • 1. Restated articles. * I explained that the purposes articulated in the articles you filed are not a tax exempt purpose and you will not be able to obtain tax exempt status for the corporation based on the current articles. Therefore, I've drafted re-stated articles that you can file. These re-stated articles state that the corporation will promote educational, scientific and charitable purposes.

At the large meeting I attended, a number of people were not certain they wanted the organization to apply for tax exempt status because if you do so, there will be very significant restrictions on what the organization can do. In particular, the organization must function for educational, charitable, literary or scientific purposes to get tax exempt status. The organization cannot carry on a trade or business except to the extent it is for one of those exempt purposes. There are also complex public charity income rules and self-dealing restrictions. I described these in detail at the other meeting. Let me know if you need more information.

To the extent you want to apply for tax exempt status, we will need to discuss how to structure your activities and finances so you have sufficient income from exempt sources to qualify. As I understand it, some of the groups cooperating on this project have a separate corporate existence and some do not. It may be advisable for some of the projects that do not have their own tax exempt status to function as fiscally sponsored projects of the corporation so the corporation can have income based on tax exempt activities. Other groups may pay rent. If the organization only has rental income, it will not be able to qualify as a tax exempt entity. Please look over the proposed articles and let me know your questions and comments. Once your group approves the re-stated articles, I will use my filing service in Sacramento to get them filed.

Bylaws

  • 2. Bylaws. * The corporation has to adopt bylaws to apply for tax exempt status and also to register with the attorney general within 30 days of acquiring assets. Bylaws serve a number of functions. First, it is in your interest to make them as standard looking as possible since you have

to send them to the IRS and various state agencies and there is a significant risk of spooking these government bodies with excessively alternative-looking bylaws. My goal is for the bylaws to incorporate the way you want to function while simultaneously looking as boring and unremarkable as possible so they can easily pass through government bureaucracy.

The second function of bylaws is in case there is a future lawsuit or power struggle. To the extent a group is functioning in a healthy fashion, it may be best to let bylaws gather dust in a filing cabinet. However, if 5 or 10 years down the line various parties hire attorneys and struggle for ownership of valuable real estate, you do not want vague bylaws that create uncertainty and pour fuel on a lawsuit.

David and I discussed a number of ways the bylaws could be structured.

The attached document is based on Foundational Document on the Sudo room wiki (https://sudoroom.org/wiki/The_Omni/2014-04-03#The_Omni_Oakland_Collective). That document calls for an organization with a board of directors composed of one representative from each component group. Corporations Code Section 5220 permits directors to be selected by designators, which can be other corporations or entities. One issue with this model is if, for tax exemption purposes, some of the independent groups become fiscally sponsored projects of the umbrella corporation. If you look at article 3, section 4, I could easily modify this language so that each project designated a director. If a project is fiscally sponsored, the board appoints a committee to operate the project with authority to raise and spend funds and determine the decision making processes of the committee.

Under Section 5220, the designators have to be specified in the bylaws. Therefore, if the group wants to add a group, it would have to amend the bylaws. If it wants to terminate a group, it would have to amend the bylaws. Amending the bylaws is fairly simple but this procedure does add some additional complexity.

As I discussed with David, this is not the only way to structure the bylaws and could potentially have weaknesses if, for example, some of the groups contributed large amounts of participants, time and money, and other groups were just a handful of people. Having a one-group-one-board-member structure potentially gives a huge amount of power to small groups that contribute only a small amount of time and money. I suggested another option would be to have a membership organization where the only way to become a member was to join one of the groups participating in the project -- with board members elected by the members. That would potentially give more representation to the groups with larger numbers of members. Ultimately, this is up to you but I am happy to advise you and/or discuss options.

The other item I discussed with David is that I strongly suggest against including consensus decision making in bylaws because doing so potentially gives a tiny number of people enormous power in a lawsuit context. This is particularly important where an asset worth millions of dollars is at issue. Consensus decision making requires a certain level of trust and good faith between participants. The function of legal documents is to operate in a context in which there is no trust or good faith and which, in fact, members hate and distrust each other. I have attached a more general memo I wrote regarding consensus for a different client that expands on this point [Note: See below for link]. I'm happy to talk to your group about this issue and your options.

The bylaws attached provide for consensus minus one for adding new groups or terminating a group (i.e. amending the bylaws) and majority rule for other decisions. However, writing the bylaws this way in no way restricts the group from using consensus on a day-to-day basis. It merely means that if there is a dispute, the larger number of groups, rather than a minority, will get their way.

Consensus

On Consensus(via Jesse)

David Graeber on Consensus

Read this: https://gist.github.com/wrought/7882285

"The essence of consensus process is just that everyone should be able to weigh in equally on a decision, and no one should be bound by a decision they detest. In practice, this might be said to boil down to four principles:

  • Everyone who feels they have something relevant to say about a proposal ought to have their perspectives carefully considered.
  • Everyone who has strong concerns or objections should have those concerns or objections taken into account and, if possible, addressed in the final form of the proposal.
  • Anyone who feels a proposal violates a fundamental principle shared by the group should have the opportunity to veto (“block”) that proposal.
  • No one should be forced to go along with a decision to which they did not assent."

"There’s really no need to be religious about it: there are lots of possible variations. And it’s important to remember that while those coming to a meeting might be presumed to have agreed to the basic principles, they have not agreed to any particular formal rules of procedure, so the procedures should adapt to the desires of the group. But generally speaking it goes something like this:

1. someone makes a proposal for a certain course of action

2. the facilitator asks for clarifying questions to make sure everyone understands precisely what is being proposed

3. the facilitator asks for concerns

a. during the discussion those with concerns may suggest friendly amendments to the proposal to address the concern, which the person originally bringing the proposal may or may not adopt

b. there may or may not be a temperature check about the proposal, an amendment, or the seriousness of a concern

c. in the course of this the proposal might be scotched, reformulated, combined with other proposals, broken into pieces, or tabled for later discussion.

4. the facilitator checks for consensus by:

a. asking if there are any stand-asides. By standing aside one is saying “I don’t like this idea, and wouldn’t take part in the action, but I’m not willing to stop others from doing so.” It is always important to allow all those who stand aside to have a chance to explain why they are doing so.

b. asking if there are any blocks. A block is not a “no” vote. It is much more like a veto. Perhaps the best way to think of it is that it allows anyone in the group to temporarily don the robes of a Supreme Court justice and strike down a piece of legislation they consider unconstitutional; or, in this case, in violation of the fundamental principles of unity or purpose of being of the group."