Board terms, term limits and rotation

This guide is for board chairs, governance committees and founders who want to set up board terms properly, or fix a board where the same people have served for fifteen years and nobody quite knows when anyone's term ends. Our guide to recruiting board members explains in brief why term limits help. This one goes further: what state law sets, how to stagger terms, how to write the bylaw, and how to rotate people off well.

Three words to know

• Term: how long a director serves before they must be re-elected, for example two or three years.
• Term limit: the most terms in a row a director can serve before taking a break.
• Staggered terms (some laws say "classified" boards): the board is split into groups whose terms end in different years, so only part of the board is up for election at once.

What state law sets

Terms are mostly a choice your bylaws make, but your state's nonprofit corporation law sets the frame. The rules vary from state to state, so read your own. Two examples show the range.

Example: New York

• Default term. Under section 703, if the certificate of incorporation or bylaws don't fix a term, it's one year.
• Longest term. A director's term can't be longer than five years, except for directors who sit on the board because of another office or position.
• Staggered classes. Under section 704, the certificate or bylaws can divide the board into two to five classes, "as nearly equal in number as possible." At first the classes end in different years; after that, each year's election fills one class for a full term. Section 703 adds that, on a classified board, a term can't be longer than the number of classes, in years.

Example: Illinois

• Board size. Under 805 ILCS 105/108.10, a board must have three or more directors, with the number fixed by the bylaws.
• Default term. Unless terms are staggered, every director's term ends at the next meeting held to elect directors.
• Staggered classes. The articles or bylaws can divide directors into classes, and the classes' terms don't have to be the same length.
• Holdover. Even after a term ends, the director keeps serving until directors are next elected.
• Resigning. A director can resign at any time by written notice to the board, its chair, or the president or secretary.

Neither of these laws requires term limits; they're left to the bylaws. Check whether your state says anything different.

Choosing terms and limits

There's no single right answer. Common choices for small charities:

• Term length: two or three years. One year means constant elections; much longer makes it hard to change course.
• Limit: two or three terms in a row, so six to nine years at most.
• Break: at least one year off before someone can be elected again.
• Officers: officer terms (chair, treasurer and so on) are usually one year, and can have their own limit. A director who becomes chair in their last term may need a short extension; write that into the bylaws rather than improvising.

Check the numbers against your state's law. In New York, for example, a three-year term on a board split into three classes works; a six-year term doesn't, because terms can't be longer than five years.

Staggering the board

Staggering keeps experience on the board while still bringing in new people. With three-year terms, split the board into three groups of about the same size. Each year, one group's terms end.

To start staggering an existing board, elect people to different first terms: some for one year, some for two, some for three. After that, everyone is elected for the full term. Record each person's group and end date in the minutes.

Here's an example for a nine-member board with three-year terms. (The names are made up.)

When someone leaves in the middle of a term, the bylaws usually say that the replacement serves the rest of that term, which keeps the groups in step. Check your state's rule: in Illinois, for example, a director elected to fill a vacancy serves until the predecessor's term would have ended, or as section 108.30 of the Act provides.

Adding term limits to your bylaws

If your bylaws don't have term limits, the board can add them by amending the bylaws, following the amendment process the bylaws set. If your charity has voting members, they may need to approve it too. Practical points:

• Start the clock fairly. Decide whether time already served counts. One option is to count only terms that start after the amendment, so nobody is pushed off at once.
• Phase it in. If half the board would hit the limit in the same year, stagger the first terms so departures are spread out.
• Say what counts. Does a partial term filled after a vacancy count as a full term? Say so in the bylaw.
• Allow a narrow exception, if you want one: for example, a one-year extension for a sitting chair or treasurer, by a two-thirds board vote, recorded in the minutes.

Our bylaws template has blanks for term length and the number of consecutive terms.

Rotating people off well

A good director who reaches the limit is a gift, not a loss. Plan the exit a year ahead:

• Pass on what they know. Ask them to write down their contacts, recurring tasks and anything only they know. Our succession planning guide has a full list.
• Recruit their replacement early, using a skills matrix, so the gap doesn't open on the day they leave.
• Keep them close. Invite them to an advisory group, a committee (if the bylaws allow non-directors on committees) or an annual thank-you event. Advisory members don't vote and don't carry a director's legal duties; make that clear in writing.
• Thank them in public, in the minutes, the newsletter and the annual report.
• Update the paperwork: the board roster, bank signers if they were one, and your state's annual report.

When the founder reaches the limit

Founders often find term limits hardest. Talk about it early, in a calm year, not when someone is about to leave. A founder can take a year off and return, serve on a committee, or, if the board wants and the bylaws allow, stay on in a staff role with the board's oversight. What matters is that the decision is the board's, made openly.

Term limits checklist

• We've read the director terms section of our state's nonprofit corporation law
• Our bylaws set the term length, the number of consecutive terms and the break before returning
• Our board is split into groups whose terms end in different years
• Every director's term end date is in our board roster
• We review term end dates at every annual meeting
• We start recruiting at least a year before someone rotates off
• Departing directors hand over what they know, and we thank them in public