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Shelter Bay Community’s Articles of Incorporation date back to July 1969 and some of the provisions have outlived their usefulness. Under Article 2 Section 18, Shelter Bay Community, Inc. may exercise the powers provided under Washington Non-Profit Corporation Act Chapter 24.03. Additionally, the community has member-approved By-Laws that govern its budgeting and assessment practices.
Section 19 was originally intended to protect the Community’s non-profit status. However, the Washington Non-profit Corporation Act, Chapter 24.03, makes Section 19 unnecessary and potentially disruptive to the Community’s operations. Section 19 may be construed as limiting the powers the Community currently exercises such as ownership of the Company, including operation of the Marina and the use of monies from one area of the community for the benefit of the entire community, or for building up reserve funds for future use. Therefore, the Board recommends eliminating Section 19 in its entirety to give the Community all powers allowed under State law as stated in Section 18, which would remain part of the Articles.
FAQs
1) This section protects us against a runaway board; if Section 19 is deleted won’t the Board have unlimited powers?
Answer: No. While the Articles of Incorporation provide the structure of the corporation - its name, purpose, membership requirements, directors structure, and duration, it is the By-Laws that specify the powers and duties of the corporation. An amendment to the Articles of Incorporation will not change the Board’s powers and duties. In fact, Members/voters of the community have the control over the community’s destiny. Members have the power to elect its Board of Directors. Members have the power to vote against budget ratification. In the 39 years of the Shelter Bay Community, Inc.’s existence, Section 19, of the Articles of Incorporation have never been used to enforce or challenge that.
2) How does this amendment impact the financial operation of the Shelter Bay Community, Inc? Will we still be a non-profit?
Answer: It won’t change the financial operation, and yes, we will still be a non-profit corporation. According to the Osbergs, Section 19 was intended to protect the Community’s non-profit status for tax purposes. Section 19 forbids the Community from operating as a for-profit corporation. It was not intended to place greater restrictions on the Community than the non-profit statutes imposed. Instead, the intent was to prohibit the Community from generating profits which it then could distribute to its members.
Shelter Bay Community, Inc. operates its business as a non-profit. All revenues and expenses are detailed in a break-even budget, which is brought to the members for examination and ratification. No distribution of profits is built into the budgets, nor has the community made any profit distributions to its members. In fact, Section 19 gets in the way of creating reserve funds for future uses, even though it is prudent for homeowners associations to have reserve funds for future maintenance or operational needs. If Section 19 is deleted, the community will continue to operate as it currently does, with member votes determining the budget ratification.
3) Is there really some other motive the Board has in presenting this Ballot Issue?
Answer: No. Section 19 was not really looked upon as a hindrance to the community’s operation. It was the Fee Simple lawsuit that first illustrated the potential of Section 19 to hamper the community’s ability to carry on its operation, including the purchase of the Shelter Bay marina. Other sections in the Articles of Incorporation (Article 2 Section 1) provide that the Community can purchase, operate and care for boat landings, mooring basins, floats and piers, with the purchase of Shelter Bay Company’s Marina fitting within that provision.
It was this lawsuit, however, that caused the Board to examine the Articles of Incorporation and their relevance to current corporate operations. It was found that Section 19 was a provision stipulated in 1969, but is not needed today. Our structure and operation has grown substantially reflecting the size of our community and the acquisition of the Shelter Bay Company, and amending the Articles of Incorporation to accommodate that growth is needed. Every corporation amends it Articles of Incorporation from time to time, and this is such an amendment. Without the change it would be like requiring us to still fit into the clothes we wore back in Junior High.
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