housing information
HOUSING INFORMATION
HOUSING NATIONAL CONSTITUTION AND STATUTES PERTAINING TO HOUSE CORPORATIONS Title V Paragraphs 54 and 56 54. Approval of Negotiations Concerning Chapter Houses. Any chapter or any affiliated house corporation desiring to lease, build, purchase, sell or otherwise dispose of a chapter house shall secure the approval of the National Council before making commitments of any nature. Where the expenditure for chapter house repairs, remodeling or other improvements may exceed five thousand ($5,000) dollars, the house corporation shall secure approval of the Executive Vice President/COO before making commitments of any nature. Each chapter or affiliate house corporation shall file with the Executive Vice President/COO an annual financial statement and other such reports as may be required. 56. Affiliated Corporation. Any chapter that now has or hereafter establishes any affiliated corporation that is supportive of the goals of the chapter shall provide the National Headquarters with copies of the Articles, Bylaws, and any amendments thereto of such corporations and shall furnish such financial and other informational reports as may be required by the National Headquarters. All such corporations shall be non-profit corporations and shall contain in the Articles of Incorporation these provisions: (a) no income or profit arising from the operations of the corporation are to inure to the benefit of any private person; (b) upon dissolution of the corporation, any assets remaining after payment of debts shall be given to The Phi Kappa Tau Fraternity, Phi Kappa Tau Foundation, or any of their subsidiaries or successors. In the event that all the foregoing are non-existent, then to some other appropriate non-profit entity qualified under Section 501 (c)(3); (c) that the closing of the Resident Council is a cause of automatic dissolution of the corporation as a failure of purpose. Surplus funds of a house corporation, a Graduate Council or a Resident Council shall be invested only in United States government securities or financial institutions providing adequately insured deposit accounts. Any funds realized by virtue of dissolution of any affiliate corporation or chapter which are given to The Phi Kappa Tau Fraternity are to be separately accounted for by the National Council and should the opportunity arise to reestablish the chapter at that institution, funds at least equal to the amount deposited will be committed to the re-colonization effort.
HOUSE CORPORATION OFFICERS RESPONSIBILITIES PRESIDENT 1. Shall be the Chief Executive Officer of the Corporation. 2. Shall schedule each meeting and preside over all such official meetings of the Corporation. 3. Shall see that all legitimate and valid orders and resolutions of the Board of Directors are carried out in a prompt and timely manner. 4. Shall ensure all official actions/articles/resolutions are in compliance with all Local, State, National, and Fraternal regulations. 5. Will ensure the replacement/addition of all Corporation members as needed and that said replacement/additions are informed of their responsibilities and obligations. 6. Shall direct the Vice President of the Corporation on the formation of standing and special committees, as needed. 7. Shall be the liaison between the Housing Corporation and the undergraduate chapter, the Board of Governors, the National Headquarters, and Domain Director as needed to all matters pertaining to the maintenance of the assets of the Housing Corporation. 8. Shall act in the best interest of the respective chapter and invite appropriate representatives of affiliated groups as needed. VICE PRESIDENT 1. Shall assume the responsibilities of the President as directed by said officer, or upon his absence. 2. Shall be responsible for the formation and maintenance of all standing and special committees, as directed by the President and act as an ex-officio member of all said committees. SECRETARY 1. Shall record and maintain minutes of all meetings as directed by the President and the Vice President of the Corporation.
2. Shall serve notice to all members of the corporation and subsidiary committees of each meeting along with an agenda for the meeting and minutes from the previous meeting as directed by the President or Vice President of the corporation. 3. Shall attest to all signatures of the President or the Vice President of the corporation on all official/legal documents.
TREASURER 1. Shall supervise the collection of all monies due the house corporation, and annually negotiate the rental rates due the corporation in the best interest of the chapter. 2. Shall maintain all assets/monies of the corporation as directed by the corporation and in compliance with all 501 (c) regulations. 3. Shall countersign all checks, drafts, notes or orders as requested/required by the corporation. 4. Shall provide an annual audit, prepared by an outside accountant, to the members of the corporation and National Fraternity Headquarters. 5. Shall procure a fidelity bond for the Treasurer and President of the corporation in an amount designated by the corporation. 6. Shall maintain and update all financial records of the corporation. These records shall be subject to review by the corporation and Graduate Council upon request. 7. Shall ensure that all appropriate State, Federal, and local taxes and other appropriate reports are prepared in a timely manner for review by the House Corporation.
ARTICLES OF INCORPORATION The Articles of Incorporation establish the legal basis for a house corporation’s separate corporate existence. The articles are usually broad in scope leaving the more specific details of internal operations to the bylaws. Typical requirements for Articles of Incorporation are: • • • •
• • •
The name of the corporation The period for which the corporation is organized The purpose or purposes for which the corporation is organized Any provisions, not inconsistent with law, which the incorporators elect to set forth in the Articles of Incorporation for the regulation of the internal affairs of the corporation, including any provisions for distribution of assets on dissolution or final liquidation. Addresses of its initial registered office, and the name of its initial registered agent at such address The number of directors constituting the initial board of directors, and the names and addresses of the persons who are to serve as the initial directors Name and address of each incorporator (1)
Particular attention should be given to the purposes clause since it could have direct ramifications in regard to the tax-exempt status. The purposes should therefore be geared to approval as a 501 (c) (7) organization.
(1) G. Webster, The Law of Associations 2.02
SAMPLE ARTICLES OF INCORPORATION We, the undersigned, being all of full age and citizens, have this day voluntarily associated ourselves together in order to form a non-stock, non-profit corporation for the purposes hereinafter stated. Under the laws of ________________________________, do here adopt the following Articles of Incorporation for such corporation. Article I Name The Name of the Corporation shall be _________________________________. Article II Purposes The purpose or purposes for which the corporation is organized are to promote and foster the fraternal principles and ideals of the Phi Kappa Tau Fraternity, and to purchase, take, receive, lease, take by gift, grant assignment, transfer, devise or bequest, or otherwise acquire and hold real and personal property for a chapter house/lodge and the furnishings for the_____________________ Chapter of Phi Kappa Tau, located at _______________________ College/ University. In furthermore of any one or more of the purposes specified above, but only to the extent permissible under section Code 501 (c) (7) of the Internal Revenue Code of 1954, The corporation shall have the following power: 1. To have a corporate seal and to use the same by causing it or a facsimile thereof to be impresses of fixed or in any other manner reproduced. 2. To sell and convey, mortgage, pledge, lease as leaser and otherwise dispose of all or any part of its properties and assets. 3. To make contract and incur liabilities which may be appropriate to enable it to accomplish any or all of its purposes: to borrow money for its corporate purposes: to issue notes, bonds, and other obligations by mortgage, pledge, or deed of trust of all or any of its purposes and income, and to invest its funds from time to time and to lend money for its corporate purposes and to take an to hold real and personal property for the payment of funds still invested or loaned. 4. To elect or appoint officers and agents of the corporation and to define their duties.
5. To make, rescind, and alter bylaws not inconsistent with these articles or the laws of the state, or the Constitution, Statutes or regulations of the Phi Kappa Tau National Fraternity for the proper administration and regulation of the affairs of the corporation. 6. To cease its corporate activities and surrender its corporate activities and surrender its corporate charter subject to the approval of the officers of the corporation. 7. The doing of all things necessary or convenient in connecting with or for carrying on said business, and the buying and selling of such real estate and personal property as may seem proper to the Board of Directors and/or Graduate Council.
Article III Duration The period of duration of the corporation is perpetual. Article IV Names and addresses of Incorporators The name and address of each incorporator is:
Article V Registered Office The initial registered office of the corporation shall be ___________________________, and its registered agent of said address shall be _______________________________________________________________. Article VI Membership The Membership of the corporation shall consist of all initiated members in good standing of _________________________ Chapter of Phi Kappa Tau. Alumni from other chapter may serve on the house corporation by invitation of the Board of Directors and/or Graduate Council. Article VII Officers The said corporation shall be governed and operated by the House Corporation Officers, which shall perform the duties and have all rights and authority of a board of directors under the law, as well as such other rights as are herein granted and as set forth in the bylaws of the corporation. There shall be ________ to _________ directors on the corporation board, and the incorporators shall constitute the initial Board of Directors. The election and term of the directors shall be set forth in the bylaws. Article VIII Limitations
The corporation does not contemplate pecuniary gain or profit incidental or otherwise to its members, and accordingly no profits will inure to the benefit of an individual. No part of any funds of the corporation shall inure to the benefits of or be distributed to its members, trustees, or officers, or to other private persons, except that the corporation shall be authorized and empowered to reasonable compensation for services rendered and to make payments, distributions, and furtherance of the purposes set forth herein. No substantial part of the activities of the corporation shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the corporation shall not participate in, or intervene in (including the publication or distribution of statements) any political campaign on behalf of any candidate for public office. Article IX Dissolution In the event of the dissolution of the corporation, or in the event it shall cease to carry out the objects and purposes herein set forth, all the property and assets of the corporation, after the payment and satisfaction of all liabilities and obligations of said corporation then existing, shall be transferred, conveyed, and distributed to the Phi Kappa Tau Fraternity, Phi Kappa Tau Foundation, or any other of their subsidiaries or successors. In the event that all of the foregoing are non-existent, then to some other appropriate private non-profit entity qualified under section 501 (c). Article X This corporation shall be subject at all times to the Constitution and Statutes of the Phi Kappa Tau National Fraternity, of which ______________________________ is a chapter.
IN WITNESS WHEREOF, these Articles of Incorporation have been executed on this _________ day of _______________ of _______________________, 19 _______.
_______________________________ _______________________________ _______________________________ _______________________________ _______________________________ _______________________________
BYLAWS Bylaws are rules adopted and maintain by a house corporation to define and direct the internal affairs of the organization. Bylaws are supplementary to the articles of incorporation and are generally more specific. Like the articles of incorporation, the bylaws can have direct ramifications on the tax-exempt status with the Internal Revenue Service. Well-developed bylaws include the following: • • • •
• • •
• •
A restatement, in greater detail, of the House Corporation purposes Qualifications of membership, classes of membership, expulsion and resignation procedures Notices, times, places, and minutes of meetings A complete description of the officers or directors of the corporation. This description should include authority, qualifications of directors, election, and terms of office, duties, removal procedures, and compensation if any. Filling of vacancies in officers or directors positions Identification of any standing or special committees A description of the financial policies to be followed by the corporation. This might include sections regarding a bank depository, fiscal year, audits and financial reports, and methods of disbursing funds Amendment procedures Dissolution procedures, including the disposition of surplus assets or all assets at dissolution
BUILDING AND RENOVATING FRATERNITY HOUSES When a monumental task is undertaken, such as building or making major renovations on a fraternity house, there are many aspects that have to be considered before the first brick is laid. 1. Loans 2. Americans with Disabilities Act 3. There are many legal and practical implications concerning the federal Americans with Disabilities Act (ADA) that must be considered when fraternity housing is built or renovated. Many fraternity houses were built before ADA was enacted and consequently do not meet the requirements specified in the ADA. If a contractor is hired to oversee the renovations he should be aware of the contents of the ADA and if it is applicable to the renovations being made to the fraternity house. If renovations are being made by interested alumni or by a variety of contractors you should contact the plans examiner for your city. 4. Safety Regulations 5. Zoning Laws 6. Projected Income Vs. Projected Costs Including Windfall
HOUSING FUND CRITERIA BACKGROUND The creation of a Housing Fund (hereafter referred to as the “Fund”) was approved at the Convention in Long Beach in 1991 and the source of funding was through a dues increase, initially, of $5.00 per member per year. At the 1993 Winter Council Meeting, an increase to $15.00 was approved and subsequently ratified by the 1993 Convention. According to the report and recommendations of the Committee on Housing at the 1991 and 1993 Conventions and upon which the action of the Convention was based, loans should be initially “...available for down payments and improvements or renovations, but not for purchase money mortgages”...; further, “...in order of priority, loans should be made to new chapters, those chapters that are not ‘bankable’ and then those that are bankable.” The report also contained recommendations for operating parameters and philosophies, composition of the Loan Committee, also known as the Housing Fund Committee and hereafter referred to as the “Committee” etc., which are incorporated herein. Housing Fund Guidelines Policy Loans/guarantees will be made to chapters meeting Basic Chapter Expectations. The Housing Fund Committee should have the latitude to make housing loans for special circumstances. Based upon the 1991 Committee report, the policy of this Fund will be to provide financing; to the extent funds are available, as may be approved by the Committee on the following order of priority: (1) New chapters; (2) Chapters, which are not “bankable;” (3) All other chapters. Such financing shall be initially available for down payments in connection with the acquisition of chapter housing; or to finance the improvement, renovation or repair of chapter housing. Financing will not be available for purchase money mortgages until approved by a majority of the Committee (Alternate: the National Council). It is understood that the financing priorities and all other aspects of the Fund may be, from time to time, modified, amended, altered or deleted by action of the National Council or Convention, as the case may be. While it is contemplated that most financing will be in the form of direct loans, the Committee may approve guarantees to other lenders provided the same criteria are met as for direct loans, and further provided that the aggregate liability for such guarantees does not exceed one-third of the assets of the Fund, or such other limit as the National Council may impose.
The Fund shall be administered by the Committee, the members of which including a chairman shall be appointed by and serve at the pleasure of the president, subject to the approval of the National Council. Such Committee members shall serve without pay, except in the case of nonfraternity members, and shall be accountable to the National Council. Reasonable expenses of Committee members, as approved by the Executive Vice President/COO or the president, may be reimbursed. The books, records and accounting shall, initially, be maintained by the National Fraternity; at such time as the Executive Vice President/COO shall determine that the Fund is of sufficient size and the number of loan accounts becomes substantial enough to warrant charging the Fund for these services, he shall make a recommendation to the National Council for allocating these costs to the Fund. Initially, the Fund will obtain its funds from additional dues assessments among active members. The Fund, subject to the approval of the National Council, shall also be empowered to issue interest bearing notes at interest rates determined by the Committee, up to an amount equal to the net worth of the Fund, provided all applicable securities laws are complied with. (Note: It is not contemplated that the interest bearing notes provision will be utilized until after the matter has been researched and a recommendation, if any, by the Committee is made to the National Council.)
Housing Fund Committee The Committee shall, as recommended by the 1993 Committee Report, consist of five persons, preferably with lending, legal, architectural, and financial or real estate expertise; and who shall be readily available as needs arise. In accordance with the 1991 recommendation of the Committee on Housing, it is suggested, but not required, that at least one of the Committee members be a non-Phi Kappa Tau member in order to provide objectivity; also that one or more domain directors serve on the Committee at any given time. In accordance with the 1993 Committee report, it is suggested that the Executive Vice President/COO be a voting member of the Committee. It is also suggested that the national financial advisor be a voting member of the Committee, if available. The chairman of the Committee shall be appointed by the national president who may also serve as a member if he so desires. The Committee will ordinarilyutilize telephonic conferencing for the conduct of its meetings. Interest Rates/Guarantee Fees Interest rates on, and guarantee fees for, loans shall be determined by the Committee. It shall be a goal of the Committee to set interest rates on loans at or slightly below market rates and at a level sufficient to cover expenses, loan losses and to provide adequate loss reserves. Initially, it is proposed that the loan interest rates be approximately one percentage point above the National average contract rate for major mortgage lenders (recently 6.84%) sup-plied by the Federal Housing Finance Board and published weekly in the Wall Street Journal. It is understood
that the Committee, in its discretion, may charge an interest rate above that specified if it shall determine that such higher rate is warranted by the risks associated with any such loan. If and when the Fund issues notes, attention should be given to an acceptable spread between the cost of such funds and the interest rate charged on loans. Guarantee fees will be determined by the Committee based on the risks inherent in the Guarantee. Initially, adjustable interest rates will not be utilized because most loans will be five-year terms or less, and the administrative matter of adjusting rates and monthly payments every year is deemed to outweigh the interest rate risk on short-term loans; also, the index to be used results in a slightly higher rate than if adjustable rate indices were used, and tends to compensate for the interest rate risk; also, the fixed rate is expected to be more easily understood and managed by the chapters. Monthly or quarterly payments of principal and interest shall be on a level payment basis, i.e. the same amount for each payment! Maximum Loan Until such time as the assets of the Fund exceed $200,000, the maximum loan(s) or guarantee(s) to any chapter shall not exceed 10% of the assets of the Fund; thereafter, no loan shall exceed $20,000 until such time as the assets of the Fund exceed $400,000; and thereafter, no loan shall exceed 5% of the assets of the Fund without approval by the National Council. Maximum Loan Term The maximum term of any loan or guarantee shall be no longer than is necessary to meet the cash flow needs of the borrowing chapter, nor in excess of the following limits: (e.g. Mo. Paymt @ 7%) Loans to $ 1,000 " " $ 5,000 " " $10,000 " " +$20,000
1 year ($ 86.53) 2 years ($223.87) 3 " ($308.78) 5 " ($396.03)
The Committee shall have the discretion to make exceptions to these limits, provided they are not exceeded by more than two years for loans of $5,000 or more. Terms in excess of seven years will not be available until such time as the Fund is of sufficient size to enable it to make loans in excess of $20,000. The maximum term of any loan for the improvement, renovation, or repair of leased property occupied by the chapter and not owned by either an alumni or House Corporation shall be six months less than the term of the lease or the above limits, whichever is less. Underwriting Standards
Applications shall be on a form prescribed by the Committee and accompanied by a check for a $100 non-refundable application fee to defray the costs of processing applications and setting up the account with the Fund. Loan applications are to be acted upon by the Committee, with a response mailed no later than one month from date of receipt of a completed application. While it is expected that few loans will require appraisals, mortgages, deeds of trust, title insurance or local recording fees, mortgage tax, etc., such expenses will be those of the chapter (if the Committee, in the Committee’s sole discretion, deems them to be necessary). In approving loans or guarantees, the Committee shall inquire into the “Four C’s of Credit” as they apply to the chapter applying for a loan: 1. Character of the chapter; 2. Capacity to carry the loan and other debt; 3. Credit history of the chapter, if any; 4. Collateral value of the property (Normally, the loan-to-value ratio should not exceed 80%). Applications can be received at anytime and shall be reviewed by the Fraternity Staff for completeness and accuracy. Where a loan is marginal in any respect, the application shall be accompanied by a statement of the urgency of the request and a Plan from the chapter as to how it proposes to handle the repayment of the indebtedness, together with an endorsement from the Fraternity leadership consultant staff concurring with or in opposition to the feasibility of the plan. Since it is a goal of the Fraternity that all chapters shall meet Basic Expectations, the Committee, in approving loans or guarantees, shall inquire into the extent these expectations have or have not been met and shall be satisfied that the applying Chapter meets or can reasonably be expected to meet such expectations at a future date. If title to the subject real estate is held by a corporation other than the chapter, loan applications shall be signed by the chapter president and be accompanied by a resolution of the chapter authorizing the borrowing; if title to the subject property is held by a corporation other than the chapter, the owner-corporation, except in the case of lessors with no relationship to the chapter, shall also sign the application and shall furnish a resolution authorizing the borrowing. In order to save expense and time, loans may be made on an unsecured basis, provided that the Committee, in its sole discretion, may require a mortgage, deed of trust or other security for any loan or guarantee of $5,000 or more and having a term of three years or more. Nothing herein shall preclude the Committee from requiring any security, even if the Committee chooses not to record the documents at the time the loan is disbursed; nor preclude it from subsequently recording such documents if it chooses to do so. The Committee shall also have the power to make exceptions to the above policy and require security on loans of less than $5,000. As a condition of any loan or guarantee, the chapter shall furnish certificates to the Fraternity showing it as a named insured on its casualty and property insurance policies, the latter of which shall be in an amount sufficient to cover all debt exposures. It shall also be a condition of any borrowing or guarantee that the chapter shall not engage in any further borrowing or
pledge, mortgage, sell, assign, lease, sublet or otherwise dispose of any of its property without the written consent of the committee. Other typical covenants will be provided in the note, including service charges for late payments, acceleration of the indebtedness for violation of any of the covenants, including bankruptcy, failure to keep the property insured, in good repair, waste, etc. Loan or guarantee approvals shall be issued at the convenience of the Committee, but in no case longer than 30 days following the receipt of a completed application. Investment of Excess Funds Assets of the Fund not required for loans shall be invested in U.S. government securities or in mutual funds of government securities having maturities of less than 10 years, e.g. Fidelity Spartan Limited Term Government Securities Fund and in accounts, including certificates of deposit, with banks utilized by the Fraternity. Effective Date/Amendment of Guidelines These guidelines will become effective on approval by the National Council and may be amended at anytime by action of the National Council. Applications are available through the Executive Offices.
HOUSING NATIONAL CONSTITUTION AND STATUTES PERTAINING TO HOUSE CORPORATIONS Title V Paragraphs 54 and 56 54. Approval of Negotiations Concerning Chapter Houses. Any chapter or any affiliated house corporation desiring to lease, build, purchase, sell or otherwise dispose of a chapter house shall secure the approval of the National Council before making commitments of any nature. Where the expenditure for chapter house repairs, remodeling or other improvements may exceed five thousand ($5,000) dollars, the house corporation shall secure approval of the Executive Vice President/COO before making commitments of any nature. Each chapter or affiliate house corporation shall file with the Executive Vice President/COO an annual financial statement and other such reports as may be required. 56. Affiliated Corporation. Any chapter that now has or hereafter establishes any affiliated corporation that is supportive of the goals of the chapter shall provide the National Headquarters with copies of the Articles, Bylaws, and any amendments thereto of such corporations and shall furnish such financial and other informational reports as may be required by the National Headquarters. All such corporations shall be non-profit corporations and shall contain in the Articles of Incorporation these provisions: (a) no income or profit arising from the operations of the corporation are to inure to the benefit of any private person; (b) upon dissolution of the corporation, any assets remaining after payment of debts shall be given to The Phi Kappa Tau Fraternity, Phi Kappa Tau Foundation, or any of their subsidiaries or successors. In the event that all the foregoing are non-existent, then to some other appropriate non-profit entity qualified under Section 501 (c)(3); (c) that the closing of the Resident Council is a cause of automatic dissolution of the corporation as a failure of purpose. Surplus funds of a house corporation, a Graduate Council or a Resident Council shall be invested only in United States government securities or financial institutions providing adequately insured deposit accounts. Any funds realized by virtue of dissolution of any affiliate corporation or chapter which are given to The Phi Kappa Tau Fraternity are to be separately accounted for by the National Council and should the opportunity arise to reestablish the chapter at that institution, funds at least equal to the amount deposited will be committed to the re-colonization effort.
HOUSE CORPORATION OFFICERS RESPONSIBILITIES PRESIDENT 1. Shall be the Chief Executive Officer of the Corporation. 2. Shall schedule each meeting and preside over all such official meetings of the Corporation. 3. Shall see that all legitimate and valid orders and resolutions of the Board of Directors are carried out in a prompt and timely manner. 4. Shall ensure all official actions/articles/resolutions are in compliance with all Local, State, National, and Fraternal regulations. 5. Will ensure the replacement/addition of all Corporation members as needed and that said replacement/additions are informed of their responsibilities and obligations. 6. Shall direct the Vice President of the Corporation on the formation of standing and special committees, as needed. 7. Shall be the liaison between the Housing Corporation and the undergraduate chapter, the Board of Governors, the National Headquarters, and Domain Director as needed to all matters pertaining to the maintenance of the assets of the Housing Corporation. 8. Shall act in the best interest of the respective chapter and invite appropriate representatives of affiliated groups as needed. VICE PRESIDENT 1. Shall assume the responsibilities of the President as directed by said officer, or upon his absence. 2. Shall be responsible for the formation and maintenance of all standing and special committees, as directed by the President and act as an ex-officio member of all said committees. SECRETARY 1. Shall record and maintain minutes of all meetings as directed by the President and the Vice President of the Corporation.
2. Shall serve notice to all members of the corporation and subsidiary committees of each meeting along with an agenda for the meeting and minutes from the previous meeting as directed by the President or Vice President of the corporation. 3. Shall attest to all signatures of the President or the Vice President of the corporation on all official/legal documents.
TREASURER 1. Shall supervise the collection of all monies due the house corporation, and annually negotiate the rental rates due the corporation in the best interest of the chapter. 2. Shall maintain all assets/monies of the corporation as directed by the corporation and in compliance with all 501 (c) regulations. 3. Shall countersign all checks, drafts, notes or orders as requested/required by the corporation. 4. Shall provide an annual audit, prepared by an outside accountant, to the members of the corporation and National Fraternity Headquarters. 5. Shall procure a fidelity bond for the Treasurer and President of the corporation in an amount designated by the corporation. 6. Shall maintain and update all financial records of the corporation. These records shall be subject to review by the corporation and Graduate Council upon request. 7. Shall ensure that all appropriate State, Federal, and local taxes and other appropriate reports are prepared in a timely manner for review by the House Corporation.
ARTICLES OF INCORPORATION The Articles of Incorporation establish the legal basis for a house corporation’s separate corporate existence. The articles are usually broad in scope leaving the more specific details of internal operations to the bylaws. Typical requirements for Articles of Incorporation are: • • • •
• • •
The name of the corporation The period for which the corporation is organized The purpose or purposes for which the corporation is organized Any provisions, not inconsistent with law, which the incorporators elect to set forth in the Articles of Incorporation for the regulation of the internal affairs of the corporation, including any provisions for distribution of assets on dissolution or final liquidation. Addresses of its initial registered office, and the name of its initial registered agent at such address The number of directors constituting the initial board of directors, and the names and addresses of the persons who are to serve as the initial directors Name and address of each incorporator (1)
Particular attention should be given to the purposes clause since it could have direct ramifications in regard to the tax-exempt status. The purposes should therefore be geared to approval as a 501 (c) (7) organization.
(1) G. Webster, The Law of Associations 2.02
SAMPLE ARTICLES OF INCORPORATION We, the undersigned, being all of full age and citizens, have this day voluntarily associated ourselves together in order to form a non-stock, non-profit corporation for the purposes hereinafter stated. Under the laws of ________________________________, do here adopt the following Articles of Incorporation for such corporation. Article I Name The Name of the Corporation shall be _________________________________. Article II Purposes The purpose or purposes for which the corporation is organized are to promote and foster the fraternal principles and ideals of the Phi Kappa Tau Fraternity, and to purchase, take, receive, lease, take by gift, grant assignment, transfer, devise or bequest, or otherwise acquire and hold real and personal property for a chapter house/lodge and the furnishings for the_____________________ Chapter of Phi Kappa Tau, located at _______________________ College/ University. In furthermore of any one or more of the purposes specified above, but only to the extent permissible under section Code 501 (c) (7) of the Internal Revenue Code of 1954, The corporation shall have the following power: 1. To have a corporate seal and to use the same by causing it or a facsimile thereof to be impresses of fixed or in any other manner reproduced. 2. To sell and convey, mortgage, pledge, lease as leaser and otherwise dispose of all or any part of its properties and assets. 3. To make contract and incur liabilities which may be appropriate to enable it to accomplish any or all of its purposes: to borrow money for its corporate purposes: to issue notes, bonds, and other obligations by mortgage, pledge, or deed of trust of all or any of its purposes and income, and to invest its funds from time to time and to lend money for its corporate purposes and to take an to hold real and personal property for the payment of funds still invested or loaned. 4. To elect or appoint officers and agents of the corporation and to define their duties.
5. To make, rescind, and alter bylaws not inconsistent with these articles or the laws of the state, or the Constitution, Statutes or regulations of the Phi Kappa Tau National Fraternity for the proper administration and regulation of the affairs of the corporation. 6. To cease its corporate activities and surrender its corporate activities and surrender its corporate charter subject to the approval of the officers of the corporation. 7. The doing of all things necessary or convenient in connecting with or for carrying on said business, and the buying and selling of such real estate and personal property as may seem proper to the Board of Directors and/or Graduate Council.
Article III Duration The period of duration of the corporation is perpetual. Article IV Names and addresses of Incorporators The name and address of each incorporator is:
Article V Registered Office The initial registered office of the corporation shall be ___________________________, and its registered agent of said address shall be _______________________________________________________________. Article VI Membership The Membership of the corporation shall consist of all initiated members in good standing of _________________________ Chapter of Phi Kappa Tau. Alumni from other chapter may serve on the house corporation by invitation of the Board of Directors and/or Graduate Council. Article VII Officers The said corporation shall be governed and operated by the House Corporation Officers, which shall perform the duties and have all rights and authority of a board of directors under the law, as well as such other rights as are herein granted and as set forth in the bylaws of the corporation. There shall be ________ to _________ directors on the corporation board, and the incorporators shall constitute the initial Board of Directors. The election and term of the directors shall be set forth in the bylaws. Article VIII Limitations
The corporation does not contemplate pecuniary gain or profit incidental or otherwise to its members, and accordingly no profits will inure to the benefit of an individual. No part of any funds of the corporation shall inure to the benefits of or be distributed to its members, trustees, or officers, or to other private persons, except that the corporation shall be authorized and empowered to reasonable compensation for services rendered and to make payments, distributions, and furtherance of the purposes set forth herein. No substantial part of the activities of the corporation shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the corporation shall not participate in, or intervene in (including the publication or distribution of statements) any political campaign on behalf of any candidate for public office. Article IX Dissolution In the event of the dissolution of the corporation, or in the event it shall cease to carry out the objects and purposes herein set forth, all the property and assets of the corporation, after the payment and satisfaction of all liabilities and obligations of said corporation then existing, shall be transferred, conveyed, and distributed to the Phi Kappa Tau Fraternity, Phi Kappa Tau Foundation, or any other of their subsidiaries or successors. In the event that all of the foregoing are non-existent, then to some other appropriate private non-profit entity qualified under section 501 (c). Article X This corporation shall be subject at all times to the Constitution and Statutes of the Phi Kappa Tau National Fraternity, of which ______________________________ is a chapter.
IN WITNESS WHEREOF, these Articles of Incorporation have been executed on this _________ day of _______________ of _______________________, 19 _______.
_______________________________ _______________________________ _______________________________ _______________________________ _______________________________ _______________________________
BYLAWS Bylaws are rules adopted and maintain by a house corporation to define and direct the internal affairs of the organization. Bylaws are supplementary to the articles of incorporation and are generally more specific. Like the articles of incorporation, the bylaws can have direct ramifications on the tax-exempt status with the Internal Revenue Service. Well-developed bylaws include the following: • • • •
• • •
• •
A restatement, in greater detail, of the House Corporation purposes Qualifications of membership, classes of membership, expulsion and resignation procedures Notices, times, places, and minutes of meetings A complete description of the officers or directors of the corporation. This description should include authority, qualifications of directors, election, and terms of office, duties, removal procedures, and compensation if any. Filling of vacancies in officers or directors positions Identification of any standing or special committees A description of the financial policies to be followed by the corporation. This might include sections regarding a bank depository, fiscal year, audits and financial reports, and methods of disbursing funds Amendment procedures Dissolution procedures, including the disposition of surplus assets or all assets at dissolution
BUILDING AND RENOVATING FRATERNITY HOUSES When a monumental task is undertaken, such as building or making major renovations on a fraternity house, there are many aspects that have to be considered before the first brick is laid. 1. Loans 2. Americans with Disabilities Act 3. There are many legal and practical implications concerning the federal Americans with Disabilities Act (ADA) that must be considered when fraternity housing is built or renovated. Many fraternity houses were built before ADA was enacted and consequently do not meet the requirements specified in the ADA. If a contractor is hired to oversee the renovations he should be aware of the contents of the ADA and if it is applicable to the renovations being made to the fraternity house. If renovations are being made by interested alumni or by a variety of contractors you should contact the plans examiner for your city. 4. Safety Regulations 5. Zoning Laws 6. Projected Income Vs. Projected Costs Including Windfall
HOUSING FUND CRITERIA BACKGROUND The creation of a Housing Fund (hereafter referred to as the “Fund”) was approved at the Convention in Long Beach in 1991 and the source of funding was through a dues increase, initially, of $5.00 per member per year. At the 1993 Winter Council Meeting, an increase to $15.00 was approved and subsequently ratified by the 1993 Convention. According to the report and recommendations of the Committee on Housing at the 1991 and 1993 Conventions and upon which the action of the Convention was based, loans should be initially “...available for down payments and improvements or renovations, but not for purchase money mortgages”...; further, “...in order of priority, loans should be made to new chapters, those chapters that are not ‘bankable’ and then those that are bankable.” The report also contained recommendations for operating parameters and philosophies, composition of the Loan Committee, also known as the Housing Fund Committee and hereafter referred to as the “Committee” etc., which are incorporated herein. Housing Fund Guidelines Policy Loans/guarantees will be made to chapters meeting Basic Chapter Expectations. The Housing Fund Committee should have the latitude to make housing loans for special circumstances. Based upon the 1991 Committee report, the policy of this Fund will be to provide financing; to the extent funds are available, as may be approved by the Committee on the following order of priority: (1) New chapters; (2) Chapters, which are not “bankable;” (3) All other chapters. Such financing shall be initially available for down payments in connection with the acquisition of chapter housing; or to finance the improvement, renovation or repair of chapter housing. Financing will not be available for purchase money mortgages until approved by a majority of the Committee (Alternate: the National Council). It is understood that the financing priorities and all other aspects of the Fund may be, from time to time, modified, amended, altered or deleted by action of the National Council or Convention, as the case may be. While it is contemplated that most financing will be in the form of direct loans, the Committee may approve guarantees to other lenders provided the same criteria are met as for direct loans, and further provided that the aggregate liability for such guarantees does not exceed one-third of the assets of the Fund, or such other limit as the National Council may impose.
The Fund shall be administered by the Committee, the members of which including a chairman shall be appointed by and serve at the pleasure of the president, subject to the approval of the National Council. Such Committee members shall serve without pay, except in the case of nonfraternity members, and shall be accountable to the National Council. Reasonable expenses of Committee members, as approved by the Executive Vice President/COO or the president, may be reimbursed. The books, records and accounting shall, initially, be maintained by the National Fraternity; at such time as the Executive Vice President/COO shall determine that the Fund is of sufficient size and the number of loan accounts becomes substantial enough to warrant charging the Fund for these services, he shall make a recommendation to the National Council for allocating these costs to the Fund. Initially, the Fund will obtain its funds from additional dues assessments among active members. The Fund, subject to the approval of the National Council, shall also be empowered to issue interest bearing notes at interest rates determined by the Committee, up to an amount equal to the net worth of the Fund, provided all applicable securities laws are complied with. (Note: It is not contemplated that the interest bearing notes provision will be utilized until after the matter has been researched and a recommendation, if any, by the Committee is made to the National Council.)
Housing Fund Committee The Committee shall, as recommended by the 1993 Committee Report, consist of five persons, preferably with lending, legal, architectural, and financial or real estate expertise; and who shall be readily available as needs arise. In accordance with the 1991 recommendation of the Committee on Housing, it is suggested, but not required, that at least one of the Committee members be a non-Phi Kappa Tau member in order to provide objectivity; also that one or more domain directors serve on the Committee at any given time. In accordance with the 1993 Committee report, it is suggested that the Executive Vice President/COO be a voting member of the Committee. It is also suggested that the national financial advisor be a voting member of the Committee, if available. The chairman of the Committee shall be appointed by the national president who may also serve as a member if he so desires. The Committee will ordinarilyutilize telephonic conferencing for the conduct of its meetings. Interest Rates/Guarantee Fees Interest rates on, and guarantee fees for, loans shall be determined by the Committee. It shall be a goal of the Committee to set interest rates on loans at or slightly below market rates and at a level sufficient to cover expenses, loan losses and to provide adequate loss reserves. Initially, it is proposed that the loan interest rates be approximately one percentage point above the National average contract rate for major mortgage lenders (recently 6.84%) sup-plied by the Federal Housing Finance Board and published weekly in the Wall Street Journal. It is understood
that the Committee, in its discretion, may charge an interest rate above that specified if it shall determine that such higher rate is warranted by the risks associated with any such loan. If and when the Fund issues notes, attention should be given to an acceptable spread between the cost of such funds and the interest rate charged on loans. Guarantee fees will be determined by the Committee based on the risks inherent in the Guarantee. Initially, adjustable interest rates will not be utilized because most loans will be five-year terms or less, and the administrative matter of adjusting rates and monthly payments every year is deemed to outweigh the interest rate risk on short-term loans; also, the index to be used results in a slightly higher rate than if adjustable rate indices were used, and tends to compensate for the interest rate risk; also, the fixed rate is expected to be more easily understood and managed by the chapters. Monthly or quarterly payments of principal and interest shall be on a level payment basis, i.e. the same amount for each payment! Maximum Loan Until such time as the assets of the Fund exceed $200,000, the maximum loan(s) or guarantee(s) to any chapter shall not exceed 10% of the assets of the Fund; thereafter, no loan shall exceed $20,000 until such time as the assets of the Fund exceed $400,000; and thereafter, no loan shall exceed 5% of the assets of the Fund without approval by the National Council. Maximum Loan Term The maximum term of any loan or guarantee shall be no longer than is necessary to meet the cash flow needs of the borrowing chapter, nor in excess of the following limits: (e.g. Mo. Paymt @ 7%) Loans to $ 1,000 " " $ 5,000 " " $10,000 " " +$20,000
1 year ($ 86.53) 2 years ($223.87) 3 " ($308.78) 5 " ($396.03)
The Committee shall have the discretion to make exceptions to these limits, provided they are not exceeded by more than two years for loans of $5,000 or more. Terms in excess of seven years will not be available until such time as the Fund is of sufficient size to enable it to make loans in excess of $20,000. The maximum term of any loan for the improvement, renovation, or repair of leased property occupied by the chapter and not owned by either an alumni or House Corporation shall be six months less than the term of the lease or the above limits, whichever is less. Underwriting Standards
Applications shall be on a form prescribed by the Committee and accompanied by a check for a $100 non-refundable application fee to defray the costs of processing applications and setting up the account with the Fund. Loan applications are to be acted upon by the Committee, with a response mailed no later than one month from date of receipt of a completed application. While it is expected that few loans will require appraisals, mortgages, deeds of trust, title insurance or local recording fees, mortgage tax, etc., such expenses will be those of the chapter (if the Committee, in the Committee’s sole discretion, deems them to be necessary). In approving loans or guarantees, the Committee shall inquire into the “Four C’s of Credit” as they apply to the chapter applying for a loan: 1. Character of the chapter; 2. Capacity to carry the loan and other debt; 3. Credit history of the chapter, if any; 4. Collateral value of the property (Normally, the loan-to-value ratio should not exceed 80%). Applications can be received at anytime and shall be reviewed by the Fraternity Staff for completeness and accuracy. Where a loan is marginal in any respect, the application shall be accompanied by a statement of the urgency of the request and a Plan from the chapter as to how it proposes to handle the repayment of the indebtedness, together with an endorsement from the Fraternity leadership consultant staff concurring with or in opposition to the feasibility of the plan. Since it is a goal of the Fraternity that all chapters shall meet Basic Expectations, the Committee, in approving loans or guarantees, shall inquire into the extent these expectations have or have not been met and shall be satisfied that the applying Chapter meets or can reasonably be expected to meet such expectations at a future date. If title to the subject real estate is held by a corporation other than the chapter, loan applications shall be signed by the chapter president and be accompanied by a resolution of the chapter authorizing the borrowing; if title to the subject property is held by a corporation other than the chapter, the owner-corporation, except in the case of lessors with no relationship to the chapter, shall also sign the application and shall furnish a resolution authorizing the borrowing. In order to save expense and time, loans may be made on an unsecured basis, provided that the Committee, in its sole discretion, may require a mortgage, deed of trust or other security for any loan or guarantee of $5,000 or more and having a term of three years or more. Nothing herein shall preclude the Committee from requiring any security, even if the Committee chooses not to record the documents at the time the loan is disbursed; nor preclude it from subsequently recording such documents if it chooses to do so. The Committee shall also have the power to make exceptions to the above policy and require security on loans of less than $5,000. As a condition of any loan or guarantee, the chapter shall furnish certificates to the Fraternity showing it as a named insured on its casualty and property insurance policies, the latter of which shall be in an amount sufficient to cover all debt exposures. It shall also be a condition of any borrowing or guarantee that the chapter shall not engage in any further borrowing or
pledge, mortgage, sell, assign, lease, sublet or otherwise dispose of any of its property without the written consent of the committee. Other typical covenants will be provided in the note, including service charges for late payments, acceleration of the indebtedness for violation of any of the covenants, including bankruptcy, failure to keep the property insured, in good repair, waste, etc. Loan or guarantee approvals shall be issued at the convenience of the Committee, but in no case longer than 30 days following the receipt of a completed application. Investment of Excess Funds Assets of the Fund not required for loans shall be invested in U.S. government securities or in mutual funds of government securities having maturities of less than 10 years, e.g. Fidelity Spartan Limited Term Government Securities Fund and in accounts, including certificates of deposit, with banks utilized by the Fraternity. Effective Date/Amendment of Guidelines These guidelines will become effective on approval by the National Council and may be amended at anytime by action of the National Council. Applications are available through the Executive Offices.
