Why the new Florida Nonprofit Corporation Act matters

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On July 1, the most significant update to Florida’s nonprofit law in decades took effect. House Bill 797, now the Florida Nonprofit Corporation Act, replaces the state’s former Not For Profit Corporation Act and brings Florida into closer alignment with the Florida Business Corporation Act and the American Bar Association’s Model Nonprofit Corporation Act.

For many nonprofit leaders across Pinellas County, this change did not arrive at an easy time. The sector is navigating funding uncertainty, rising demand for services, and the ordinary pressures of running mission-driven work with lean teams. Adding a legal update to that list is understandably received, in some organizations, as one more thing.

I want to offer a different framing.

This law is, on balance, good news. It modernizes a statute that had grown out of step with how nonprofits actually operate. It clarifies the roles and responsibilities of boards and officers. And it strengthens the governance foundation that well-run organizations already rely on. The work of engaging with it is worth doing well — not because the law demands it, but because the work itself makes organizations stronger.

What the new law does

At its core, HB 797 governs the corporate structure of Florida nonprofits. Nonprofit status and tax-exempt status are two different things. The former is state law. The latter is federal, granted through the IRS. This new act governs the state corporate structure, regardless of an organization’s federal tax classification.

The law applies to every nonprofit corporation organized under Florida law — to boards, officers, and, where relevant, voting members. Its provisions cover standards of conduct, conflicts of interest, member-based governance, records and inspection rights, electronic governance, and the structural rules for mergers, conversions and dissolutions.

Rather than attempt to summarize the entire statute, I want to draw attention to three ideas worth every nonprofit leader’s careful thought.

The first is the concept of default rules.

The new law is built around defaults — provisions that apply automatically when an organization’s bylaws are silent on a given matter. If bylaws have not been reviewed in years, the new defaults may not reflect how the organization actually operates. Most defaults can be adjusted through the bylaws, but a few cannot be overridden. For example, the law provides a default one-year term for directors when the governing documents do not specify otherwise. Silence in bylaws is not neutral. That reality alone is reason enough for every board to sit with its governing documents this year.

The second is a strengthened standard of conduct for directors and officers.

Directors and officers are expected to act in good faith and in the organization’s best interest, exercise reasonable care, make informed decisions and rely appropriately on qualified professional counsel. Officers now have an affirmative duty to report certain material information, including actual or probable material violations of law or breaches of duty, through the appropriate organizational channels. The law also incorporates a new “recklessness” standard into its liability framework for directors and officers, addressing circumstances involving the conscious disregard of serious and obvious risks.

For most boards operating with care, these standards affirm what is already true. The intent is to protect organizations, and the communities they serve, from the harm that follows when governance falters.

The third is a more rigorous framework around conflicts of interest.

Conflicts of interest are not always problematic, and they can arise naturally on boards made up of engaged community members. What the new law makes clear is that process matters. Disclosure of the conflict, careful documentation, appropriate participation by directors who are qualified to act on the matter, and a clear record of how the board reached its decision all contribute to a defensible process. Depending on the transaction, additional steps such as recusal and appropriate comparability information may also be warranted. Reviewing conflict of interest policies against this framework is one of the most immediate and worthwhile actions a board can take.

For most organizations, the practical response does not need to be complicated: make sure board and executive leadership understand what changed, review the bylaws and key governance policies against the new law, and involve qualified counsel where changes are needed.

Where to turn

Pinellas Community Foundation does not provide legal counsel on this legislation, nor would we position ourselves as a substitute for it. Our role is to help the organizations we work alongside know that this change is happening, understand why it matters, and connect with resources that can help them respond well.

The Florida Nonprofit Alliance has done excellent work on this front. Their website (flnonprofits.org) offers a recorded webinar produced in partnership with Gunster, Yoakley & Stewart, a set of frequently asked questions, and a Compliance Self-Assessment Tool that helps organizations identify where governance updates may be needed. We recommend nonprofit leaders start with the webinar and FAQs, then consider the self-assessment tool alongside a review of governing documents with qualified legal counsel.

Every nonprofit organization in Pinellas County contributes something important to the strength of this community. That work deserves a governance foundation as thoughtful and durable as the work itself.

This law is best approached as an opportunity: to look carefully at how your organization is structured, to strengthen what warrants strengthening, and to move forward with clearer footing.

PCF will continue to share resources like these as they become available. We are grateful, as always, to be doing this work alongside so many extraordinary leaders across our county.

Duggan Cooley is President and CEO of the Pinellas Community Foundation.