Organization powers: Overview, definition, and example
What are organization powers?
Organization powers refer to the rights, authorities, and abilities granted to an organization (such as a corporation, non-profit, or partnership) to carry out its functions, pursue its objectives, and make decisions within the scope of its legal structure and governing documents. These powers are often outlined in the organization's charter, bylaws, articles of incorporation, or other foundational documents and can include the ability to enter into contracts, hire employees, own property, sue or be sued, and engage in business activities. Organization powers define what an entity can and cannot do legally.
Why are organization powers important?
Organization powers are important because they establish the legal framework within which an entity operates. By clearly defining the powers of the organization, these provisions help ensure that all actions taken by the organization are legitimate and fall within the scope of what is authorized by law or its governing documents. This helps protect the organization and its members from unauthorized actions and provides clarity for stakeholders (e.g., investors, employees, customers) on what the organization is legally empowered to do.
Understanding organization powers through an example
Imagine a corporation is formed to engage in real estate development. The organization powers granted to the corporation in its articles of incorporation might include the authority to buy, sell, and lease property, enter into financing agreements, and employ individuals. These powers allow the corporation to take the necessary steps to carry out its business objectives, such as acquiring land for development, signing contracts with contractors, and obtaining loans for projects.
In another example, a non-profit organization may be granted the organization powers to collect donations, fundraise, enter into partnerships with other charitable entities, and distribute funds for specific charitable purposes. These powers allow the non-profit to operate in alignment with its mission while ensuring that its actions comply with its governing rules and applicable laws.
An example of organization powers clause
Here’s how an organization powers clause might appear in the foundational documents of a corporation or non-profit:
“The Corporation shall have the power to engage in any lawful activity for which corporations may be incorporated under the laws of [jurisdiction]. This includes, but is not limited to, the power to enter into contracts, acquire property, hire employees, and issue shares, as set forth in the Corporation's Articles of Incorporation and Bylaws.”
Conclusion
Organization powers are crucial for defining the legal scope within which an entity can operate. They provide clarity about what an organization is authorized to do, ensuring that it operates within its established framework and remains compliant with legal requirements. By clearly outlining these powers in organizational documents, the rights and duties of the organization, its leaders, and its members are made explicit, helping prevent overreach or confusion.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.