Tag Archives: bylaws constitutions

Sociocratic Bylaws

CertificateExamples of Sociocratic Bylaws

Both two examples of sociocratic bylaws posted on Sociocracy.info are based on legally filed documents. They that sociocratic principles and practices can be specified and legally approved. The Bylaws for a Sociocratic Business are based on those of a LLC registered in Delaware. The Bylaws for a Sociocratic Organization is based on the bylaws of an advocacy organization incorporated in Washington DC.

Bylaws for sociocratic organizations and associations differ from those of sociocratic businesses only in tone and the specific provisions for each business or organizational model. Public corporations will have investors, for example, and non-profit associations will have members. Each will require specifying the rights of their stakeholders.

These examples may be adapted for associations, clubs, corporations,  intentional communities, condominiums, cooperatives, small businesses, etc. Some clauses may not apply and others will need to be amplified or added to meet the legal requirements of your county, province, or state.

The sections that specify sociocracy as the governance structure and consent as the method of decision-making, however, are usually the same. Titles may change to follow the customary practice in a particular field, but this is not a substantial difference.

Powers of the Board of Directors

People are most often concerned about the requirements for a Board of Directors that has certain powers. Typically a Board has life and death power over an organization while a sociocratic Top Circle does not. A Top Circle has unique responsibilities, as does a Board, but does not have the power to dissolve or sell the business or organization.

Most requirements for Boards can be accommodated by stating that the Board of Directors is identical to the Top Circle and by understanding that the Board may be responsible by law for certain decisions but that doesn’t mean it has to have the sole power to make them. These decisions can be delegated. The role of the Board becomes to ratify the decisions ensuring that they were made using proper process and assuming shared responsibility for the outcome.

Majority Vote

The second concern is the typical requirement of majority vote for most if not all decisions of the Board. The minimum for majority vote is usually 51% of those present and voting, or 50% plus one when 50% produces a fraction. The requirement of consent is 100% of those present and consenting. Since the 51% majority is included in the 100% consenting, this requirement is satisfied.

Part of the reason majority vote is required is to ensure that a minimum number of members have approved a decision. Some organizations require a “super majority” of 80% or even 98%. Another reason for requiring majority vote is to ensure that decisions get made. The majority can decide to move forward when there is dissension that endangers the organization.

The same conflict might occur in sociocratic organizations, but they use a different solution. When consent cannot be reached, the decision goes to an expert, one who is a member of the Board if appropriate, or to another expert capable of making an informed decision.

Legal Advice

These examples are for reference only.  Laws differ significantly between jurisdictions. Professional legal advice is required to ensure that the laws protecting your organization have been addressed and that your bylaws have been properly and unambiguously worded. A missing comma can dramatically and disastrously change the meaning.

In addition to helping you understand what is included in bylaws, these examples will help you draft your own bylaws for your lawyer and then modify them as advised. This allows your organization to make many of its decisions before becoming overwhelmed with external expectations and legalese.

Plain English

For decades, Plain English has been taught as the standard in the legal field. But because they are still in the computer, many law firms are still using boiler plate legal phrases from the mid 20th century. Insist that your documents be written in Plain English.

Plain English for Lawyers by Richard C. Wydick has been the accepted reference for over 25 years and maybe helpful.

Writing bylaws may seem like a tedious chore but it is a document that defines your organization and gives everyone a common understanding of how the organization will function.

Self-definition that is hard and that is the core of bylaws.

Bylaws for a Sociocratic Organization

This example is for an organization is based on the bylaws of a membership advocacy organization incorporated in Washington DC. It may be adapted for associations, intentional communities, condominiums, cooperatives, etc. It includes the key clauses for establishing a sociocratic governance structure and consent as the basis of decision-making.

Depending on the organization, some clauses may not apply and others will need to be amplified or added. For example, your organization may be solely membership based or have no members. Or be a condominium homeowner associations or a cooperative food coop.

Changes to the sections unrelated to the governance structure should follow the laws of the jurisdiction and organizational  preferences. Those concerning sociocratic governance and decision-making can almost always be adapted to local requirements. The most common requirements are for a Board of Directors with certain powers. This can be accommodated by stating that the Board of Directors identical with the Top Circle. The second usual requirement is for majority vote. Since the minimum majority vote is usually 51%, or 50% plus one when 50% produces a fraction, this is included in the requirement of consent which would be equal to 100%.

This document is for reference only and does not constitute legal advice. Because laws differ between jurisdictions, professional legal advice is required to ensure that all the legal requirements for your organization are included and properly worded.

It can be helpful, however, to draft your own bylaws for your lawyer and then add and modify as advised. This allows you to make many decisions before becoming overwhelmed with the legalese in which many legal documents are written. If you are provided with sample documents, insist that they be written in Plain English. Plain English has been the standard for decades though many lawyers are still using standard legal phrases from the 19th century.

Plain English for Lawyers by Richard C. Wydick has been the accepted reference for over 25 years and maybe helpful.

(Appendix E is an example for incorporated or limited liability businesses.)

Bylaws FOR A SOCIOCRATIC Organization

BYLAWS 

1. Description
2. Principles of Governance
3. Governance Structure
4. Circle Governance
5. Decision-Making
6. Board of Directors
7. Elections & Terms
8. Meetings
9. Members
10. Advisory Council
11. Financial Practices
12. Annual Report
13. Indemnification
14. Amendments
15. Dissolution

Addendum: Conflict of Interest and Confidentiality Agreement

1. DESCRIPTION

1.1 Name & Affiliations

The name of the organization is the [name]. The Organization is [description of the organization].

Wherever “Organization” appears, substitute the name or shortened name of the association. A definition of terms should also be added. What does “member” mean for example.

1.2 Legal Structure

The Organization is a nonprofit organization incorporated under the laws of [jurisdiction] exclusively for charitable and educational purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code of 1986, as now enacted or hereafter amended, including making distributions to similar organizations for the same purposes.

1.3 Vision, Mission, and Aim

The strategy and policies of the Organization will be directed toward realizing its vision, mission, and aim.

1.3.1 Vision

The vision of the Organization, the dream that inspires it, is a [vision statement].

1.3.2 Mission

The mission of the Organization, that will make the vision tangible, is to [statement of mission].

1.3.2 Aim

The aim of the Organization, the products and services that realize its mission, shall be to [statement of aim].

1.4 Governance

The Organization shall be governed according to the principles of sociocratic governance as specified in § 2, Sociocratic Governance.

2. SOCIOCRATIC GOVERNANCE

2.1 Definition

Sociocratic governance shall be defined as a method of governance that delegates policy making to all levels of the organization and establishes equivalence between its members within their domain of responsibility.

2.2 Benefits

The principles and methods of sociocratic governance develop:

a.  Strong leadership and clear delegation;

b.  Self-governance, self-organization, and cooperation;

c.  The ability to apply scientific theory and methods; and

d.  Responsibility for continuing profession development.

2.3 Governing Principles

Three principles are essential to sociocratic governance:

2.3.1 The Principle of Consent

Consent governs policy decision-making. Except as required by law and as otherwise stated in these bylaws, policy decisions shall be made with the consent of those they directly affect. Consent shall be defined as having “no reasoned objections” and as further defined in §§ 5.2, Consent and 4.2, Limitations of Consent.

Policy decisions are defined in §5.3, Definition of Policy.

2.3.2 The Principle of Circles

The Organization shall govern itself through a circular hierarchy of semi-autonomous, self-organizing circles that are responsible for policy decisions within their domain. Circles and the circular hierarchy are further defined and described in §3 Governance Structure.

2.3.3  The Principle of Double-Links

In the hierarchical structure of circles, a lower circle shall be double-linked to the next higher circle by the operations leader and one or more representatives of the lower circle as described in §§ 3, Governance Structure and 4.2, Circle Officers.

2.3.4  The Principle of Consent Elections

Except as required by law, circle members shall elect people to functions and tasks by consent as described in §2.1 Election Process.

3. GOVERNANCE STRUCTURE

3.1 A Circular Hierarchy of Circles

The governance of the Organization shall be structured as a circular hierarchy formed by double linked, semi-autonomous circles that reflect the operations of the organization. A circular hierarchy shall be defined as one in which each circle by means of representative participation in the next higher circle must consent to the policy decisions that affect its domain. Circles are thus linked in an apparently linear hierarchy but policy decision-making forms a feedback loop with each circle occupying a place in the loop.

3.2 Circle Definition

A circle includes every person with a common aim who has a significant role in the operations of a department or unit of the Organization. Circle members meet with to make policy decisions within their domain of responsibility. Circle responsibilities are further defined in §§ 5.1, Domain of Decision-making, and 4, Circle Governance.

3.3 Circle Limitations

No circle’s policies shall conflict with the law, these bylaws, the principles and methods of sociocratic governance as defined in these bylaws, or the policies of other circles.

3.4 Circle Membership

3.4.1 Definition

Except for the Board of Directors as defined in §6 Board of Directors, a circle shall include all members of the organization who have significant roles in the circle’s operations, whether they are paid or volunteer staff. Each circle shall define “significant roles” and shall be as inclusive as possible while ensuring (1) the stable functioning of the circle and (2) the ability of its members to deliberate with a consistent membership.

3.4.2 Consent to Members

Circle members shall have the right to consent to new members.

3.4.3 Equivalence

Within the circle meeting, the principle of consent shall be used to ensure that all circle members are equivalent in decision-making.

3.4.4  Size

Circles shall be of a size that allows inclusive and efficient deliberations, generally no larger than 40 members with 20 being the optimal maximum.

3.5  Board of Directors or Top Circle

The Board of Directors shall be identical to the Top Circle, the highest circle in a sociocratically governed organization. Except as required by law or as otherwise stated in these bylaws the board shall function according to the provisions of §4 Circle Governance, and be subject to any provisions of these bylaws and all the Organization’s rules and regulations.

Board-specific requirements for composition, powers, and responsibilities as required by the [state] are specified in § 5.6 Decisions of the Board of Directors, and § 6, Board of Directors.

3.6 General Management Circle

The general management or coordinating circle shall manage the operations of the Organization within the limits set by the Board. It shall consist of the managing director, and the operations leader and one or more representatives from each department circle.

3.7 Department Circles

Each department circle shall consist of the operations leader and members of the department circle and, if it has responsibility for other circles, the operations leaders and at least one representative of those circles.

3.8 Further Subdivision

The hierarchical pattern established in §§ 3.2–3.3, shall be repeated throughout the Organization.

3.9 Circle Names

Circle names are for illustration only and may be changed as desired and appropriate as long as the hierarchical chain of leadership, representation, and delegation is clear.

4. CIRCLE GOVERNANCE

4.1  Circle Responsibilities

Each circle, within the limits set by the next higher circle, shall:

a. Determine and control its own policies to achieve its aim as defined by the next higher circle

b. Assign the leading, doing, and measuring of circle roles and responsibilities to its own members to achieve its aim and execute its own policies

c. Maintain a record keeping system of policy decisions and other information as specified in § 4.4 Circle Record Keeping

d. Assume responsibility for the professional development of the circle and its members

e. Elect one or more representatives from its members to serve as the circle’s representative(s) to the next higher circle

i. Decide how to allocate the resources included in its budget, including the hiring and firing of personnel

f. Create lower circles as it determines appropriate, assigning an aim and allocating part of its resources to those circles

g. With the participation of the representative(s) of that circle, elect the operations leader of the next lower circle,

h. Decide whether lower circles shall be subdivided, combined, or dissolved

4.2  Limitations of Consent

The principle of consent shall not apply to all circle members in two classes of circle decisions:

4.2.1  Circle Elimination or Redefinition

The operations leader and representative(s) of the lower circle may participate in any discussion of dissolution or restructuring of their circle but their consent shall not be required for the higher circle to make a decision.

4.2.2  Personnel Decisions

A circle member or members about whom decisions are being made may participate in any discussions but shall be excluded from participation in consent decisions related to their own benefits of employment, compensation, or service.

4.3  Circle Officers

Except for the board of directors as defined in § 6.4, Executive Officers, each circle shall have the following officers:

a.  Operations Leader

The operations leader shall be elected by the next higher circle to manage the day-to-day operations within the lower circle’s domain. The operations leader shall be a member of both the higher and lower circles but shall not serve as the representative of the lower circle.

b.  Facilitator

A facilitator shall be elected by each circle to conduct circle meetings, provide leadership in decision-making, and ensure that the circle is functioning according to the principles and methods of sociocratic governance.

c. Executive Secretary

Each circle shall elect an administrative secretary to manage the affairs of the circle and perform tasks related to its functioning:

1. Arranging and announcing circle meetings,

2. Preparing the agenda in consultation with the facilitator and operations leader, and other circle members

3. Distributing study materials and proposals

4. Taking and distributing minutes

5. Performing any other tasks assigned by the circle

d.  Logbook Keeper

A logbook keeper shall be elected by the circle to maintain the circle logbook as defined in § 4.4, Circle Record Keeping. Depending on the size of the circle and the complexity of its work, the office of the logbook keeper may be combined with that of the administrative secretary.

e. Representative(s)

One or more representatives, other than the operations leader, shall be elected by the circle to participate in the next higher circle. The circle representative(s) participates as a full member in both the lower and higher circles but cannot be the same person as the operations leader. Otherwise, any member may fill more than one office and offices may be combined.

4.3  Circle Meetings

All circles shall meet at least quarterly to review their policies, evaluate their effectiveness, adopt new policies if necessary, and review development plans and progress.

4.4  Circle Record Keeping

Each circle shall create and maintain a logbook that includes but is not limited to:

a. Organization’s vision, mission, and aim statements

b. Organization’s bylaws, rules, and procedures

c. Organization’s strategic plan

d. Diagram of the Organization’s circle structure

e. Budgets of both the Organization and the circle

f. Circle aims

f. Circle policy decisions and meeting notes

e. Circle development plans

f. Individual members’ aims, roles and responsibilities, and development plans

f. Any other documents that record the business of the Circle

Circle members shall have a copy or easy access to a copy of the circle logbook. Circle members shall maintain their personal logbook with their aims, roles and responsibilities, development plans, and any other documents related to their individual roles and responsibilities as circle members.

5. DECISION-MAKING

5.1 Aim & Domain of Decision-Making

A circle’s aim shall be determined by the next higher circle and defines the circle’s domain of responsibility. In order to accomplish their aim, circles shall be responsible for making the policy decisions governing operations within their domain.

5.2 Consent

The principle of consent shall be applied to all circle decisions. Objections to a proposed decision must be

a. based on the decision’s adverse affect on the circle member’s ability to fulfill their roles and responsibilities in achieving the aim of the circle, and

b. reasoned, meaning that reasons for the objection must be explained clearly enough for the objection to be resolved.

For all or some decisions, other methods of decision-making can be used by the circle if the decision is made by consent and like all policy decisions reviewed on a regular basis.

5.3 Definition of Policy

Policy decisions govern the day-to-day operations activities of the Organization and include, but are not limited to:

a.  Setting aims

b.  Defining the scope of work

c.  Designing the work process

d.  Allocating resources

e.  Delegating functions and tasks

f. Evaluating group and individual performance

g.  Determining compensation

h.  Planning professional development

5.4 Operations Decisions

Day-to-day operations in a circle’s domain shall be governed by the circle’s policy decisions and directed by the operations leader. A circle shall establish policies that determine which methods of decision-making will govern operations decisions. These methods may include autocratic decisions by the operations leader.

5.5 Operations Decisions without a Policy

If a necessary operations decision is not covered by an existing policy, the operations leader shall make the decision and request that it be reviewed at the next circle meeting or at a special circle meeting called for this purpose as described in § 8. Meetings.

The operations leader, or other person acting as an operations leader, shall determine at his or her sole discretion that such a decision is necessary.

5.6  Decisions of the Board of Directors

Decisions of the board shall also be made by consent, and consent, as a higher standard than majority vote, shall be considered satisfaction of the legal requirement that board decisions be made by majority vote of the directors present and eligible to vote.

5.7  Failure to Reach Consent

If after all options have been exhausted, a circle, other than the board, cannot achieve consent on a proposed action, the decision shall be referred to the next higher circle.

If after all options have been exhausted, the board cannot achieve consent on a proposed action, the decision shall be referred to the appropriate expert director, and if necessary, that director’s organization.

5.8  Proxies

The right to participate in decision-making or any other action of any circle, including the board, may not be delegated or exercised by proxy unless required by law.

6. BOARD OF DIRECTORS

6.1  Authority

Within the requirements of the laws of [jurisdiction], the board, as the top circle of the Organization, shall manage and direct the business of the Organization with full power to engage in any lawful act unless otherwise limited by these bylaws.

6.2   Responsibilities

The board is responsible for ensuring that the Organization, as a non-profit organization, is acting in accordance with the public trust and any laws that govern non-profit corporations. Other responsibilities include, but are not limited to:

a. Setting and overseeing the execution of a strategic plan,

b. Ensuring fiscal responsibility,

c. Maintaining long-term viability,

d. Generating new ideas and directions, and

e. Maintaining connections with external persons, organizations, agencies, and any other bodies necessary to the development and functioning of the Organization.

6.3  Composition

The Board shall include:

a. The managing director (the chief executive officer)

b. One or more representatives of the general management circle

c. Three or more expert directors as defined in § 6.5 Expert Directors

d. Other directors as determined by the board

6.4  Executive Officers

6.4.1 Number and Titles

As required by law, the board shall elect from its members a minimum of three executive officers: a president, executive secretary, and treasurer. In accordance with the law and at its own discretion, the board may use other names to designate the executive officers.

6.4.2 President

The president shall:

a. Oversee board compliance with the law, the Articles of Incorporation, these bylaws, the principles and methods of sociocratic governance, and the board’s own decisions

b. Ensure that the board functions as a circle in accordance with the provisions of § 4, Circle Governance, including ongoing professional development

c. Execute all instruments requiring a signature on behalf of the Organization

d. Serve as or designate a public spokesperson for the Organization,

e. Perform other duties necessary to the office or as required by the board, and

f. Perform the duties of other executive officers if they are unable or unwilling to complete them as stated in these bylaws or at the direction of the board

6.4.3  Executive Secretary of the Board

The executive secretary of the board shall perform all the functions specified for executive secretaries of all circles in §4.3.b Executive Secretary.

In addition, the executive secretary of the board shall:

a. Give, or cause to be given, any notices required by law or by these bylaws

b. Assume responsibility for corporate and board circle records

c. Maintain custody of the seal of the organization, if any, and validate documents by affixing the seal as authorized by the board or the president

d. Perform the duties of the president if he or she is unable or unwilling to complete them as stated in these bylaws or at the direction of the board

e. Perform such other duties as may be assigned by the board or the president

6.4.5  Treasurer

The treasurer shall:

a. Oversee financial affairs

b. Have custody of all funds and securities until otherwise assigned

c. Establish or cause to be established appropriate financial records, accounts, and practices to ensure judicious use and care

d. Prepare or cause to be prepared budgets, fundraising plans, and financial reports

e. Make the financial records available in accessible format in accordance with the practice of sociocratic organizations for transparency as required by § 11 Financial Practices

f. Perform the duties of the executive secretary if he or she is unable or unwilling to perform them

g. Perform other duties as required by the board

6.5  Expert Directors

A minimum of three (3) directors shall be elected by the board to provide expertise in specific areas and to serve as independent connections to the larger social, financial, governmental, and sociocratic environment.

6.5.1 Sociocratic Expert Director

Unless none are available to serve, one or more of the expert directors with expertise related to the application and teaching of the principles and methods of sociocracy.

6.5.2 Other Expert Directors

To the extent possible, other areas of expertise shall include:

a. Education of the public on issues related to governance

b. Financial management of non-profit organizations

c. Fundraising and development

d. Legal affairs

e. Social and environmental concerns.

Expert directors may have more than one designated area of expertise as determined by the board. Expert directors are full members of the board and participate fully in decision-making and the affairs of the board.

6.6  Accountability

Each director shall exercise independent judgment in good faith and in the best interests of the organization with the care of an ordinarily prudent person under similar circumstances.

6.7 Compensation

With the exception of the managing director, the general management circle representatives if employed by the organization, and any expert directors who are otherwise providing contracted professional services to the organization, directors shall not receive compensation for their services, although they may be reimbursed for ordinary and necessary expenses incurred in fulfilling their responsibilities.

6.8 Conflict of Interest and Confidentiality

Each director shall sign and the secretary shall retain or cause to be retained in the files of the organization a copy of the conflict of interest and confidentiality policy.

6.9 Transparency

Whenever possible, the board shall ensure compliance with the practice of sociocratic organizations to make records of all transactions transparent and available to the members, staff, and other interested parties.

In order to address a reasoned objection to any information being classified confidential, the board shall establish policies providing for examination that protects the information and makes it available for review.

7. ELECTIONS & TERMS

7.1 Election Process

Board members, board officers, and circle officers shall be elected applying the principle of consent elections as required in § 2 The Principle of Consent Elections. Elections may be conducted as an item of business on any meeting agenda or in a meeting called for this purpose. The process shall include but is not limited to:

a.  Nominations with rationale

b.  Discussion and resolution of objections, if necessary

c.  Consent

The facilitator or another person elected for this purpose shall conduct the process and may propose what appears to be the best choice given the reasons presented in the nominations and discussion. Consent to the facilitator’s proposal must be confirmed.

7.2 Date of Elections

Election of directors, executive officers, and other circle officers shall be conducted at the circle’s annual meeting, as specified in § 8.2 Annual Meeting, and as necessary to fill vacant positions.

7.3 Terms of Office

7.3.1 Incorporating Directors

Incorporating directors shall begin their terms on the date of incorporation and continue until the first annual meeting of the board.

7.3.2 Directors and Officers

Except as limited by §7.6, Completion of Terms, directors and circle officers shall be elected for one-year terms in the first annual meeting of each circle and annually there after, and shall be eligible for re-election.

7.4 Resignation

Resignations must be in writing and received by the circle secretary.

7.5 Removal

A director or circle officer may be removed on the decision of the circle without his or her consent as required by § 4.2 Limitations of Consent.

Such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election shall not itself create contract rights.

7.6 Completion of Terms

7.6.1  Directors

As required by law, any director elected to complete the term of a director who has left the board shall be elected to serve the remainder of that term only.

7.6.2  Circle Officers

Circles other than the board may establish their own rules for the completion of terms including electing for the remainder of the term plus one year.

7.6.3  Vacant Positions

The executive officers of the board, as required by law, and other circle officers shall be replaced as soon as possible. Other than officers, circles may decide not to fill a vacant position.

8. MEETINGS

8.1 Annual Meeting

One circle meeting a year shall be designated the annual meeting for purposes of conducting elections as specified in § 7 Elections & Terms. Other business may also be conducted at this meeting as determined by the circle.

[An annual meeting of stakeholders is required by many jurisdictions for both for-profit and non-profit corporations, membership organizations, condominiums, etc.]

8.2 Circle Meetings

Circles shall meet at least quarterly at an agreed upon time and place including by any telephonic, digital electronic means, or any other method that allows circle members to deliberate, resolve objections, and consent to decisions.

8.3 Special Circle Meetings

Special meetings may be held at the request of any circle member at a time convenient to a sufficient number of other circle members to constitute a quorum, if required by the circle’s policies. Such request should be made to the executive secretary of the circle or as otherwise determined by the circle.

8.4 Notice

At least seven (7) days advance notice must be given to each circle member for any meeting in which decisions or other actions are to be made, subject to § 8.5, Waiver of Notice. Methods of notification include a note in the records of the last circle meeting; notification by mail, facsimile, telephonic, or digital electronic; or any other method as determined by the circle.

When possible, such notice shall include proposed agenda items and any supporting documents.

8.5  Waiver of Notice

The circle may determine in its policies when notice of meetings, including special meetings, may be waived.

Presence at a meeting or failure to pay attention to methods of communication established by the circle shall constitute waiver of notice.

8.6 Quorum

Members present by telephonic or other means that allow them to participate in the discussion, resolve objections, and consent or vote, as appropriate, shall be included in the quorum.

8.6.1 Board of Directors

As required by law, unless written consent is given by absent members and is presented to the secretary before the meeting, one-third of all board members must be present in order for business to be conducted or actions taken. In no case, however, shall business be conducted or actions taken with less than three directors participating.

8.6.2  Circles other than the Board

Circles other than the board may determine their own quorums for all meetings, for a specific meeting, or for a class of meetings.

8.5  Actions without a Meeting

8.5.1  Board of Directors

Any action required or permitted at a meeting of the board may be taken without a meeting if written consent is granted by all directors entitled to vote or consent as appropriate. Written consent may include notices by mail, facsimile, electronic means, or other methods as determined by the Board and such notices shall be filed with the minutes of the board.

By law consent to an action without a meeting shall have the same force and effect as consent or unanimous vote given in a meeting.

8.5.2  Other Circles

Any action required or permitted at a circle meeting may be taken without a meeting by consent of all members as specified in this section for the board of directors or according to any process set by circle policy.

9. MEMBERS

[For membership organizations this section should define members and their privileges and obligations.]

9.1 Classes

The board shall establish at least one class of membership in the Organization.

9.2 Non-Voting

All members will be non-voting members because conducting meaningful elections or other decision-making processes in a diverse and geographically distributed membership would be impractical.

9.3. Participation in Governance

The circles shall establish appropriate means by which members who are participating in the work of the Organization can also participate in the policy-making related to that work.

10. ADVISORY COUNCILS

The Board may establish one or more advisory councils in order to achieve the purposes of the Organization.

11. FINANCIAL PRACTICES

11.1  Financial Practices

The financial practices of the Organization shall follow the highest standards of accountability and transparency. Unless doing so would reveal personal information of employees, donors, or other persons; or otherwise compromise the stability of the Organization, financial records will be available to all members and employees of the Organization, and to other such persons as the board determines.

11.2  Use of Funds

Organization funds shall only be used for activities related to the Organization’s mission as stated in § 1.3, Mission, and exclusively for charitable and educational purposes.

11.3  Fiscal Year

The fiscal year shall begin on the first day of January and end on the last day of December unless otherwise determined by the board.

11.4  Compensation

The Organization shall follow the sociocratic practice of fixed and variable compensation for all employees.

12. ANNUAL REPORT

The Organization shall publish, in any media, an annual report that shall include, but not be limited to, a summary of the Organization’s activities and a financial report for the previous year. The annual report shall be available to the public.

13.INDEMNIFICATION

13.1  Rights

Except as otherwise limited by law and these bylaws, each director, employee, or volunteer of the Organization shall be indemnified by the Organization and shall not be held liable for damages or the costs of their defense for any acts or omissions as a result of providing services or performing duties on behalf of the Organization.

These rights of indemnification shall, in the case of the death of a Director, employee, or volunteer exist to the benefit of his or her heirs and estate.

13.2  Limitations

Indemnification as specified in § 13.1, Rights, shall not include:

a. Any act or omission that is not reasonably included in the services or duties requested or approved by the Organization

b. The willful misconduct of the director, employee, or volunteer

c. A crime, unless the director, employee, or volunteer had reasonable cause to believe that the act was lawful

d. A transaction that resulted in an improper personal benefit of money, property, or service to the director, employee, or volunteer

e. Any act or omission that is not in good faith and is beyond the scope of authority of the Organization

13.3  Professional Services

With the exception of expert directors functioning in their roles as directors, the limitation of liability in § 13.2 Limitations, shall not apply to any licensed professional employed by the Organization in his or her professional capacity.

14. AMENDMENTS

These Bylaws may be altered or repealed and new bylaws adopted by the board with a minimum of thirty (30) days notice to all circle members of intent to amend, including the wording of such amendment. The purpose of such notice shall be to allow circles to call special meetings, if they consider it necessary, to deliberate on such amendment and to select a representative(s) to participate in the deliberations in the next higher circle.

No amendment shall be made that would adversely affect the Organization’s qualification under Section 501(c)(3) of the Internal Revenue Code of 1986, (or any successor provision).

15. DISSOLUTION

15.1  Notice

Acting in accordance with the laws of the District of Columbia, the Organization may be dissolved by the board with a minimum of thirty (30) days notice to all circle members of the intent to dissolve, including the reasons for the proposed dissolution. The purpose of such notice shall be to allow all levels of the circle structure time to call special meetings, if they consider it necessary, to deliberate on the proposal and to select a representative(s) to participate in the deliberations of the next higher circle.

15.2 Distribution of Assets

On dissolution of the Organization, any remaining assets shall be distributed to one or more charitable, educational, scientific, or philanthropic organizations qualified for a tax exemption under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. Such organization will be recommended by members, employees, and volunteers of the Organization and determined by the board.

ADOPTED ­ ­­­­[date]

 

From: We the People: Consenting to a Deeper Democracy by John Buck and Sharon Villines (Sociocracy.info Press, 2016)

Creative Commons Icons

“Operating Agreement & Bylaws for a Sociocratic Business” is published under a Creative Commons License.  It may be reused with attribution, shared with others, and transformed as the basis of another document, but it is not released for commercial use without specific permission.

For permission, please contact Sharon Villines at https://www.sociocracy.info

The PDF version: Bylaws for a Sociocratic Organization

Bylaws for a Sociocratic Business

The following example is modified from the operating agreement for a Limited Liability Company (LLC) incorporated in Delaware. It contains the key clauses that can be used in many forms of sociocratic operating agreements and bylaws including nonprofit organizations, associations, local government agencies, etc.

In the United States, LLCs are now legal in all 50 states and the District of Columbia and currently provide the most efficient mechanism for establishing a fully sociocratic company that owns and governs itself. While a sociocratic company allows investors and protects the interests of investors, it does not grant them the exclusive right to sell or to control the company.

The key clauses can also be used as the basis of bylaws for a C or S corporation, but in these cases a “double corporation” strategy is required to enable the company to raise capital without giving stockholders the right to override consent decision-making. An explanation of the double corporation is outside the scope of this book but it involves setting up a foundation to hold the controlling stock. The members of the board of the foundation and the board of the corporation are defined as identical and the decisions of one to be those of the other.

This operating agreement is an example only and does not constitute legal advice. Because laws differ between jurisdictions, professional legal advice is required to address specific circumstances.

The Creative Commons License and a PDF copy can be found at the end of this page.

Operating Agreement
of a Sociocratic Limited Liability Company (LLC)

Article 1  The Sociocratic Circle-Organization Method 

1.1  Organizational Model

The LLC shall be structured and governed in accordance with the sociocratic Circle-Organization Method, the underlying principles of which are as follows:

1.1.1  The Principle of Consent  

The principle of consent governs decision-making. This means that not every decision requires consent but that there will be consent about the policies by which decision-making takes a different form. Consent means there are no argued and paramount objections. In other words, a policy decision can only be made if no member of the circle raises a argued and paramount objection to it.

1.1.2  The Principle of Circles 

The organization is composed of a hierarchy of semi-autonomous, self-organizing circles. A circle is a group of persons who are operationally related. Each circle has its own aim and has the authority and responsibility to execute, measure, and control its own activities and to maintain an appropriate level of knowledge and skill, assisted by a program of development conducted by the circle.

1.1.3  The Principle of Double-Linked Circles 

All circles are double-linked. A lower circle is always linked to a higher circle in such a way that at least two persons, that is, the operational leader and at least one elected representative from the lower circle, belong to and participate in the decision making of the next higher circle.

1.1.4  The Principle of Election of Persons 

Persons are elected to functions and tasks exclusively by consent after open discussion.

1.2  Structure 

The organization of the LLC shall be a hierarchy of double-linked circles, in the following order, from top to bottom:

1.2.1  Top Circle

The top circle shall be the highest circle of the LLC, the powers and responsibilities of which are set forth in the articles of organization and this operating agreement. The composition of the top circle is defined in Article 2.

The top circle shall manage and direct the business and affairs of the LLC with full power to engage in any lawful act or activity under the General Limited Liability Company (LLC) Law of [name of jurisdiction] unless otherwise limited by the provisions of this operating agreement.

1.2.2  General Circle

The general circle shall consist of the chief executive officer (CEO), operational leaders of the department circles, and at least one representative from each department circle. The general circle shall manage the operations of the LLC within the limits set by the top circle.

The general circle shall:

(a) Determine and control policy to realize its own aim(s) within limits set by the top circle.

(b) Delegate part of its decision-making authority to the department circles so their aims can be achieved.

(c) Assign functions and tasks to its own members to execute its own policy.

(d) Decide, in its sole discretion, whether new department circles should be created or whether existing circles should be split up, combined, or dissolved. The department circle in question may not participate in the decision to dissolve its circle. The consent of the representative of the department circle in question shall not be required for the general circle to act, but such representative may participate in such discussions in the general circle.

1.2.3  Department Circles

Each department circle shall consist of (1) either an operational leader and the members of the department circle or an operational leader and the operational leaders of the section circles and (2) at least one representative from each section circle. The department circle shall:

(a) Determine and control the policy to achieve its aim within the limits set by the general circle.

(b) Assign tasks to its own members to execute its own policy.

(c) Decide, in its sole discretion, whether a new section circle should be set up or whether existing circles should be dissolved. The section circle in question may not participate in the decision to dissolve its circle. The consent of the representative of the section circle in question shall not be required for the department circle to act, but such representative may participate in such discussions in the department circle.

1.2.4  Section Circles

Each section circle shall consist of (1) either an operational leader and the members of the section circle or an operational leader and operational leaders of the unit circles and (2) at least one representative from each unit circle. The section circle shall:

(a) Determine and control policy to achieve their aims within the limits set by the department circle.

(b) Assign tasks to their own members to execute their own policy.

(c) Decide, in its sole discretion, whether new unit circles should be set up or whether existing circles should be dissolved. The unit circle in question may not participate in the decision to dissolve its circle. The consent of the representative of the unit circle in question shall not be required for the section circle to act, but such representative may participate in the discussions in the section circle.

1.2.5  Unit Circles

Each unit circle shall consist of an operational leader and its own members. Unit circles shall:

(a) Determine and control policy to achieve its aim within the limits set by the section circle.

(b) Assign tasks to its own members to execute its own policy.

1.2.6  Further Subdivision

The hierarchical pattern established in sections 1.2.2-1.2.5 shall be repeated for any levels below unit circles.

1.3 Investing and Working Partners

Persons can become members of the LLC by investing money or by performing active labor or both. People or organizations that have made investments in the LLC shall be called hereafter “investing partners.” Those who perform labor shall be called hereafter “working partners.” Members of the general, department, section, and unit circles, and any circles below unit circles shall be working partners. A natural person can be both a working partner and an investing partner. A legal person, for example, another LLC, S corporation, or C corporation, can be an investing partner but not a working partner.

[The decision to have “working partners” or “employees” has tax and other implications that require legal advice. The intention is that everyone be able to participate in decision making on an equivalent basis. The term “partner” is not intended to infer greater authority nor “employee” less authority.]

ARTICLE 2  TOP CIRCLE

[Top Circle is the generic term for the highest governing level of the organization. It retains the circular process connotations and links to the primary sociocratic theory. Organizations may wish to adopt other terms to reflect their culture and environment.]

2.1  Composition and Number

The top circle shall consist of no less than six (6) nor more than twelve (12) members, as such number may be established from time to time by resolution of the top circle. This number shall include:

(a) external experts,

(b) the CEO of the LLC, and

(c) one or more representatives of the general circle of the LLC.

2.2 External Experts

[The importance of the title “board of directors” varies amongst legal jurisdictions and not all organizations are required to have a board. When a board is required, there may also be a requirement that it be composed entirely of persons from outside the organization, the external experts. If that is the case, the following clause can be used: “The top circle shall totally encompass all the duties of the board of directors. Every meeting of the top circle shall be considered a meeting also of the board of directors. The board of directors shall not meet separately from the top circle.” If a board is required by law, it may also be necessary to have a separate article defining the board and its responsibilities. If so, it can be modeled after the clauses used for the top circle.]

The external experts, chosen from outside the organization, shall represent each of the following roles:

(a) A person with expertise in financial matters relating to the business of the LLC.

(b) A person with expertise in the area of human resource management, small business management, or other management specialties.

(c) A person with expertise in sociocratic (dynamic self-governance) or other technical areas in which the LLC may choose to conduct its business.

(d) A representative of the governmental or legal community.

2.3  Separation of Roles

The CEO, elected representatives from the general circle, and the person with expertise in financial matters must be separate persons. These persons and other members of the top circle who are not working partners of the LLC may fulfill one or more than one of the other above roles at the same time unless this could result in a statutory, operational, or legal incompatibility.

2.4  Designation of Roles

The top circle, by resolution, shall designate the roles that each of its members fulfills.

2.5  Election, Terms, and Reimbursement

The members of the top circle, except for the financial expert, may be proposed by an external organization with consent from the CEO and elected representative(s). If such external organizations are not available, the top circle may elect persons with expertise in these areas to participate in the top circle for specified terms. The experts’ terms shall be staggered and up to two years in duration, renewable at the invitation of the top circle. The top circle may choose to reimburse these experts for their services.

2.6  Resignation; Vacancies

Any member of the top circle may resign from the top circle at any time by submitting a letter of resignation to the secretary of the top circle

Any newly created membership or any vacancy occurring in the top circle for any cause may be filled by a person selected by the consent of the remaining members of the top circle and each member so elected shall hold office until the expiration of the term of office of the member of the top circle  whom he or she has replaced or until his or her successor is elected and qualified.

The CEO shall be elected or re-elected at two-year intervals at the first top circle meeting after the annual investors’ meeting. The representative(s) from the general circle shall be elected at intervals of up to two years on a schedule set by the general circle.

2.7  Regular Meetings

Regular meetings of the top circle may be held at such places within or without the [name of jurisdiction] and at such times as the top circle may from time to time determine, and if so determined, notices thereof need not be given.

2.8  Special Meetings

Special meetings of the top circle may be held at any time or place within or without the [name of jurisdiction] whenever called by any member of the top circle. Notice of a special meeting of the top circle shall be given by the person or persons calling the meeting at least forty-eight (48) hours before the special meeting.

2.9  Telephonic Meetings Permitted

Members of the top circle may participate in a meeting thereof by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this operating agreement shall constitute presence in person at such meeting.

2.10  Consent Decision Required for Action

The principle of consent by all parties shall be organized as follows: At all meetings of the top circle one-half of the members of the top circle or at least 2 members of the top circle, whichever number is the greater, shall constitute a quorum for the transaction of business. All decision-making by the top circle, however, shall be according to the principle of consent; that is, whether or not a member of the top circle is present, consent is required of all the members of the top circle to all proposed decisions.

Any member of the top circle absent from a meeting of the top circle shall be notified within forty-eight (48) hours of the proposed decision(s) of the top circle. Unless the absent top circle member objects to a decision of the top circle within seventy-two (72) hours of receipt of such notice, he or she will be deemed to have consented to such decision.

If an absent top circle member objects to any action of the top circle in a timely fashion, the matter will be placed upon the agenda for the next meeting of the top circle, which meeting shall be held within seventy-two (72) hours of the receipt of such objection. Any member absent from such top circle meeting shall be deemed to have consented to the decision that the top circle reconsiders.

2.II  Organization

Meetings of the top circle shall be presided over by the president of the top circle or another person chosen by consent of the top circle. In the absence of the president or other chosen person, a chairperson chosen at the meeting shall preside over the meeting. The secretary shall act as secretary of the meeting, but in his or her absence the person presiding may appoint any person to act as secretary of the meeting.

2.12  Informal Actions

Any decision required or permitted to be made at any meeting of the top circle may be made without a meeting if all members of the top circle consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the top circle.

ARTICLE 3  EXECUTIVE OFFICERS OF THE TOP CIRCLE

3.1  Executive Officers; Election; Qualifications; Term of Office; Resignation; Removal; Vacancies. 

The top circle shall annually elect executive officers from amongst its members: a president, secretary, and treasurer and it may, if it so determines, choose a chairperson (or facilitator) of the top circle and a vice chairperson (or second facilitator) of the top circle from among its members. The top circle may also choose one or more vice presidents, one or more assistant vice presidents, one or more assistant secretaries, and one or more assistant treasurers. Each such officer shall hold office until the first meeting of the top circle after the annual meeting of investing partners next succeeding his or her election, and until his or her successor is elected and qualified or until his or her earlier resignation or removal.

Any officer may resign his or her executive office at any time upon written notice to the secretary of the LLC. The secretary may resign at any time upon written notice to the president. The top circle may remove any officer from his or her executive office at any time without necessarily removing him or her from the top circle. Such removal shall be without prejudice to the contractual rights of such officer, if any, with the LLC.

Any number of executive offices may be held by the same person unless prohibited by governing law. The top circle at any regular or special meeting may fill any executive officer vacancy occurring in any office of the LLC by death, resignation, removal, or otherwise for the unexpired portion of the term.

3.2  Power to Require Security 

The top circle may require any of its members, and any officer, agent, working member, or employee of the LLC to give security for the faithful performance of his or her duties.

ARTICLE 4  CIRCLE MANAGEMENT

4.1  General Provisions

Management of all circles of the LLC with the exception that management of the top circle shall be in accordance with the following procedures only to the extent that such procedures are not inconsistent with Article 2 or Article 3 hereof, or any other provisions of this operating agreement, the articles of organization, or the laws of [name of jurisdiction].

4.1.1  Circle Regulations

Each circle shall be a separate organ of the LLC and shall be empowered to draft its own regulations with respect to the tasks, authority, and responsibilities of the circle, which regulations shall not be in conflict with this operating agreement or any regulations that the top circle may adopt.

4.1.2  Assisting Circles

A circle is authorized to form assisting (or helping) circles to prepare decision-making recommendations for the circle. The assisting circle may be composed of persons from the circle, other circles, and external advisors.

4.1.3  Circle Decisions and Limits

Circles may make decisions within certain limits agreed on in the next higher circle; individual members may make independent decisions within the limits drawn up by their own circles.

4.2  Decision Making

4.2.1  The Principle of Consent

Decision-making shall be in accordance with the principle of consent or “no objection.” Decision making does not require consent to be used for every decision of the circle, however, but it must be used to establish an alternative means of decision making for a specific decision or for a specific class of decisions.

4.2.2  Objections

Should there be a paramount objection to a decision, arguments for the objection must be given. An objection without reasoned argument will not be considered.

4.2.3  Second Meetings

If a circle is unable to reach a decision on a particular matter, a new meeting of the circle shall be convened after at least forty-eight (48) hours, with the same subject on the agenda.

4.2.4  Referring Decisions

If a circle is unable to reach a decision on a particular matter in a second meeting of the circle, the chairperson may refer the matter to the next higher or lower circle for decision or recommendation.

4.2.5  Annual Decision-Making Audit

An independent auditor shall review the decision-making process in each circle annually and shall report to the top circle whether the decision making of the circles conforms to this operating agreement.

4.2.6  Assuming Decision-Making Authority

The next higher circle is responsible for assuring that decision making in a circle functions according to this operating agreement. If the next higher circle concludes that the decision-making within a circle does not function according to this agreement, the next higher circle may take over the decision making of that circle on an interim basis.

The circle shall continue to make recommendations to the next higher circle concerning its area of responsibility. The next higher circle shall take such action(s) as it deems necessary to re-establish the circle’s performance according to sociocratic (dynamic self-governance) principles as soon as possible. The next higher circle shall restore decision-making authority to the circle as soon as either the next higher circle or the independent auditor determines that decision-making is functioning according to sociocratic (dynamic self-governance) principles.

4.3  Selection of Persons

4.3.1  Officers and Representatives

Each circle shall elect a chairperson (or facilitator) of circle meetings and a secretary from amongst its members. Each circle shall also elect one or more representatives of the circle in the next higher circle, whether or not that person is a member of the circle, provided the representative is in some way connected to the LLC. These elections shall be conducted annually, or as deemed necessary by the circle, at a meeting convened for this purpose, according to the consent principle and after open discussion.

4.3.2  Multiple Functions

Persons may fulfill more than one function at the same time, unless this could result in a statutory, operational, or legal incompatibility, provided that the operational leader (elected by the next higher circle) and the representative may not be the same person.

4.3.3  Procedures for Appointment and Dismissal

Each circle shall determine procedures for the appointment and dismissal of members of the circle, in accordance with the law, this operating agreement, and the articles of organization. A circle shall make decisions as to the appointment or dismissal of its members only after the person involved has been given an opportunity to present his or her arguments. However, the person involved may not participate in the making of this decision.

In the absence of a written agreement to the contrary between an individual working partner and the LLC, these procedures shall not constitute a contract between any person and the LLC and all working partners of the LLC shall continue as working partners at the will of the LLC.

4.3.4  Objections to Appointments or Dismissals

In the event a circle objects to the appointment of or seeks to dismiss a representative of the next lower circle, the circle shall submit objections to the next lower circle concerning the functioning of its representative in the circle. Should the consideration of these objections not result in consent between the higher circle and the next lower circle, the higher circle may deny the representative the right to represent the lower circle in the higher circle.

Such denial of representation is an extreme remedy and the higher circle should only undertake it as a final resort and should take all necessary action to restore representation of the next lower circle as soon as possible.

4.4  Circle Meetings

4.4.1  Frequency

Circles shall meet at regular intervals, at least six times per year.

4.4.2  Convening and Notice

Regular circle meetings shall be convened by the chairperson (or facilitator) of the circle. All members shall receive notice of the meeting, the agenda, and any relevant information necessary to make decisions on matters to be discussed at the meeting within a reasonable time prior to the meeting.

4.4.3  Special Meetings

The chairperson shall convene a special meeting within seven (7) days of a request therefore from any member of the circle.

Should the chairperson fail to convene such a meeting within seven (7) days after the receipt of such a request, the circle member who made the request may convene the meeting.

4.4.4  Members Present (Quorum)

It is not necessary for all the members of the circle to be present to hold a meeting, however, consent is required from all members of a circle before a decision can take effect. Each circle shall establish its own written policy defining a quorum for conducting business and its procedures for obtaining consent from absent members.

4.4.5  Delegation of Participation

Members who are unable to be present can delegate their right to participate in decision making to another member of the circle. The right to participate, however, does not constitute a proxy consent or veto. The delegated right to participate is the right to present arguments on behalf of another circle member.

4.4.6  Recording Decisions

Any decision made during a circle meeting shall be recorded in circle minutes or notes to be circulated to all members of the circle and to other circles with which the circle is linked within three (3) days of the meeting in the format determined by the organization.

4.4.7  Amending or Repealing a Delegated Decision

Amending or repealing a delegated decision is possible provided the consent of the circle involved has been obtained.

ARTICLE 5 COMPENSATION AND PROFIT SHARING

5.1  Fixed Compensation

Both investing partners and working partners engaged in active operations shall receive fixed compensation to be reimbursed only from earnings from operations. The fixed part of the investing partners’ reimbursement will be calculated at the end of fiscal year at the then prevailing prime lending rate. Working partners will be reimbursed throughout the business year at a fixed rate analogous to wages or salaries.

5.2  Variable Compensation

Both investing partners and working partners will receive variable reimbursements to be reimbursed only from earnings from operations. The reimbursements will vary depending on profitability. Variable compensation will be in the form of short-term measurement (STM) and long-term measurement (LTM) payments. STM payments will be made only when profits for the month exceed the targeted profit percentage. If profits for a month fall below the targeted profit percentage, that shortfall must be covered before any STM payments can be made. LTM payments will be made once or twice annually at the discretion of the top circle.

5.3  Determining Fixed and Variable Payments

5.3.1  At least annually, the top circle shall determine the amount targeted for company reserves and the targeted profit percentage.

5.3.2  At least at the end of each fiscal year, the top circle or person(s) delegated by the top circle will normally deduct the targeted reserve from the profits, calculate the amount of fixed payments due to investors per Section 7.1, and subtract that amount and the amount of the targeted reserve from the profits available for variable payments to the parties. The variable payments, however, are so important to the measurement process, a key component of the LLC management, the top circle can choose to make variable payments before fully paying investors’ fixed payments.

5.3.3  The top circle or person(s) delegated by the top circle will calculate an STM payment for the investing and working partners each month and an LTM payment once or twice a year.

5.3.4  The top circle shall decide whether to have the company pay taxes on retained earnings at the corporate tax rate or to pass all earnings through to the partners.

OTHER ARTICLES 

[Additional articles may be necessary to address such issues as indemnification, conflict of interest, fiscal year, corporate seal, and so forth. Care must be taken to ensure that these clauses do not contradict  or undermine the provisions of Articles 1 through 6.]

ARTICLE X MISCELLANEOUS

Amendment of This Operating Agreement

This operating agreement may be altered or repealed and new agreements made by the top circle applying the principle of consent in accordance with the provisions of these agreements, with a minimum of thirty (30) days notice to all members of the LLC including investing partners, working partners, and board of directors members of intent to amend this operating agreement. The purpose of such notice shall be to allow all levels of the circle structure, including the investing partners, time to call special meetings, if necessary, to deliberate, and to select representatives to attend the deliberations of the next higher circle.

ADDENDUM
CONDUCT OF MEETINGS OF INVESTING PARTNERS

Article 1  Meetings of Investing Partners

Meetings of investing partners shall be conducted in accordance with the sociocratic (dynamic self-governance) method. By consent, the investing partners may choose methods and structures of decision-making other than consent for a meeting of investing partners.

Article 2  Notice of Meetings 

Whenever the investing partners are required or permitted to take any action at a meeting, a written notice of the meeting shall be given to investing partners which shall state the place, date, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the articles of organization, or these operating agreements, the written notice of any meeting shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to the investing partners. If mailed, such notice shall be deemed to be given when deposited in the email or mail, postage prepaid, directed to the investing partner at its address as it appears on the records of the LLC.

2.1  Annual Meeting of Investing Partners

The investing partners shall meet annually for the purpose of electing a representative(s) to the top circle and determining the date and time of the next meeting. Only persons who have made monetary investment in the LLC plus the CEO plus the representative(s) from the general circle to the top circle shall participate in said meeting.

2.2  Special Meetings of Investing Partners

Special meetings of the investing partners may be called with at least 15 days notice by one or more of the investing partners, CEO, or elected representative to the top circle. Only the investing partners, the CEO, and the representative(s) to the top circle from the general circle shall be entitled to participate in such meetings. Special meetings will be for the sole purpose of considering the removal and/or replacement of the investing partners’ representative(s) to the top circle.

2.3  List of Investing Partners Entitled to Participate in Annual and Special Meetings of Investing Partners

The secretary of the top circle, upon notice of an annual or special meeting of the investing partners, shall prepare and make, at least ten (10) days before such meeting, a complete list of the investing partners entitled to participate in the meeting, arranged in alphabetical order, and showing the address of each investing partner and the percentage of equity registered in the name of each investing partner. Such list shall be open to the examination of any investing partner in a designated electronic location.

Article 3  Quorum 

Except as otherwise provided by law, the articles of organization, or this operating agreement, at each meeting of the investing partners the presence in person or by electronic means of a person or persons representing at least one-half of the total investment in the LLC plus the CEO or a  Representative of the general circle shall constitute a quorum.  The investing partners may, at their sole discretion, form a legal entity.

Article 4  Organization of Investing Partners Meeting

Meetings of the investing partners shall be presided over by the CEO, by a representative of the general circle, or by another person elected at the meeting by consent. The meeting attendees shall elect a secretary or direct the CEO to appoint a person to act as secretary of the meeting.

Article 5   Participation in Meetings 

Each investing partner in attendance shall be entitled to participate in the consent decision-making process in the investing partners meeting. Members who are unable to be present can delegate their right to participate in decision making to another member of the investing partner’s circle. The right to participate, however, does not constitute a proxy to consent or veto. The delegated right to participate is the right to present arguments on behalf of another circle member.

Article 6  Fixing Date for Determination  of Investing Partner of Record

6.1  Fixed Record Date

In order that the LLC may determine the investing partners entitled to notice of or to participation in any meeting of investing partners or any adjournment thereof; or entitled to receive payment of any funds or other distribution or allotment of any rights; or entitled to exercise any rights in respect of any change, conversion, or exchange of partnership equity; or for the purpose of any other lawful action, the top circle may fix a record date. The record date shall not precede the date upon which the resolution fixing the record date is adopted by the top circle. The record date

(a) shall not be more than sixty (60) nor less than ten (10) days before the date of the next scheduled meeting of the investing partners;

(b) nor in the case of any other action, it shall not be more than sixty (60) days prior to such other action.

6.2  No Fixed Record Date

If no record date is fixed,

(a) the record date for determining investing partners entitled to notice of or to participate at a meeting of investing partners shall be at the close of business on the day preceding the day on which the meeting is held;

(b) the record date for determining investing partners for any other purpose shall be at the close of business on the day preceding the day on which the top circle adopts the resolution relating thereto.

A determination of investing partners of record entitled to notice of or to participate at a meeting of investing partners shall apply to any adjournment of the meeting; provided, however, that the top circle may fix a new record date for the adjourned meeting.

Article 7  List of Investing Partners Entitled to Participate 

The person or persons responsible for calling an annual or special meeting of the investing partners must give the secretary of the top circle notice of the meeting at least fifteen (15) days in advance of the date of the meeting.

From: We the People: Consenting to a Deeper Democracy by John Buck and Sharon Villines (Sociocracy.info Press, 2007)

 

“Operating Agreement & Bylaws for a Sociocratic Business” is published under a Creative Commons License.  It may be reused with attribution, shared with others, and transformed as the basis of another document, but it is not released for commercial use without specific permission.

For permission, please contact Sharon Villines at https://www.sociocracy.info

The PDF version: BylawsCC