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What are Corporate Bylaws?
Corporate Bylaws, also known as company or business bylaws, are a set of legally binding rules that a corporation writes to guide its internal management. Corporate Bylaws outline company policies, such as:
Which rules should be included in Corporate Bylaws?
There are many decisions to be considered when writing Corporate Bylaws, such as:
- Company management structure: If the company will have a simple structure (consisting of a president, treasurer, and secretary) or a complex management structure (containing a CEO, CFO, COO, presidents, and vice presidents)
- Notice for special meetings: The amount of notice needed to call a special meeting, if notice is required
- Remote meetings: Whether or not directors and shareholders meetings permit the use of remote communication
- Voting: What percentage of votes constitutes a quorum, if shareholders can form voting trusts, and if cumulative voting is allowed
When do Corporate Bylaws come into effect?
Corporate Bylaws are usually formally adopted by the corporation’s directors at the first Directors' Organizational Meeting.
After forming and agreeing to the bylaws, the rules and procedures outlined in the document will come into effect and begin guiding the company’s internal management.
Are Corporate Bylaws required by law?
Yes, most states have laws requiring a corporation to have Corporate Bylaws. See this table to find out if your state requires corporations to have Corporate Bylaws:
Who can amend Corporate Bylaws?
You may need to amend your Corporate Bylaws from time to time. Corporate regulations and laws occasionally change, as do the corporation’s business needs. It’s essential to update your Corporate Bylaws to reflect these changes.
Directors and shareholders can amend a company’s Corporate Bylaws using a Director's Resolution or a Shareholder's Resolution after voting to pass the changes. Once an amendment has been agreed to in writing, the directors adopt and integrate it into the Corporate Bylaws.
What is the difference between Articles of Incorporation and Corporate Bylaws?
Corporate Bylaws and Articles of Incorporation are both important steps toward initially creating and organizing a corporation. However, they serve very different purposes.
Articles of Incorporation are legal papers that a company files with the Secretary of State to register as a corporation. The articles contain information which is available to the public, such as the name of the corporation and the address of its registered office.
Corporate Bylaws are internal policies that lay out the day-to-day rules and operating procedures for a corporation after it has been formed. These don’t need to be filed with the government as they are a matter of private contract.
Are Corporate Bylaws signed or notarized?
No, Corporate Bylaws don’t need to be signed or notarized.
Although it isn’t required by law to have the documents signed, having each director sign the document does add to its legitimacy.
Where do I find Corporate Bylaws?
There are a few ways to find a company’s Corporate Bylaws. If you’re a director or shareholder, you’ll have access to the bylaws and likely already have a copy.
Nonprofit organizations and publicly traded companies make their bylaws available to the public. You can search for a company on the U.S. Securities and Exchange Commission website to find its bylaws or submit a request directly to the company.
Accessing a private company’s bylaws is a little more challenging if you’re an outsider. You can submit a request, but the private company has the right to deny it. On the other hand, it may be in a company’s best interest to share its bylaws with investors and banks interested in how you run the company.
How do I write Corporate Bylaws?
You can create your Corporate Bylaws by completing LawDepot’s questionnaire. Using our template ensures you complete the following necessary steps.
Step 1: Select your corporation type
This is where you will list your company as a for-profit or a nonprofit.
Step 2: Describe your incorporation status
Your incorporation status is whether or not your company is recognized as an official corporate entity. This is where you will state if your company is an official corporation or if you’ve filed your articles of incorporation or any other necessary documents required for incorporation.
Step 3: State your location
Start your Corporate Bylaws document by stating in which state your business is incorporated. If your company isn’t incorporated yet, you can choose the state where you plan to incorporate.
Each state has its own Business Corporation Act or equivalent. LawDepot will customize your document to meet your state’s corporate rules and regulations.
Step 4: Provide your corporation’s registered name
Your Corporate Bylaws need to include your corporation’s registered name.
States have their own rules about naming a corporation. However, many require that a business make it clear that it’s a corporation by including terms like Corporation, Incorporated, and Limited or abbreviations like Co., Corp., Inc., and Ltd.
You must provide the corporation’s name for both non and for-profit organizations.
Step 5: Outline shareholder meeting rules
Outline the rules that will govern shareholder meetings. For example, determine:
- The requirements for a quorum
- Whether remote communication (e.g., phone or video conferences) is an option
- Whether shareholders can form a trust
- If cumulative voting is an option when electing directors
This section of LawDepot's template applies to for-profit corporations only.
Requirements for a quorum
A quorum is the minimum percentage of voting shares that need to be present for a shareholders’ meeting to proceed. The shareholders possessing these voting shares can attend in person or by proxy.
If your Corporate Bylaws don’t address quorums, then, by default, a majority of a corporation’s shareholders must be present to hold a meeting.
Voting trusts
A voting trust is where shareholders agree to give their voting shares to a third party called a trustee. The trustee is typically obliged to vote per the desires of the participating shareholders.
Cumulative voting when electing directors
Cumulative voting is an option when voting to elect directors to the board. It allows a minority shareholder to take all the votes they’d typically use in multiple elections and apply them to a single director’s election.
This system prevents a majority shareholder from electing all the Directors of a corporation by allowing a minority shareholder to apply all their cumulative votes to one director.
Step 6: Create rules for board meetings
Your Corporate Bylaws need to state the following:
- How many directors the corporation has
- How long a board term is
- The requirements for a quorum
- Whether remote communication (e.g., phone or video conferences) is an option
- Whether a director can make a decision without holding a meeting first
- The required amount of notice for calling a special meeting of the directors
The directors can call special meetings to resolve specific issues that can’t wait until the next regularly scheduled meeting. When determining how much notice is necessary for calling a special directors’ meeting, LawDepot’s template lets you choose from:
- Reasonable notice
- A number of hours
- A number of days
“Reasonable notice” is open to interpretation and depends on the corporation’s established business practices. The advantage of this option is its flexibility. If you would prefer something more definite, choose one of the other options.
Step 7: Choose a corporate structure
Officers make up various upper-level roles in a corporation. You can choose between a simple officer structure or a custom one.
Simple officer structures consist of a president, a treasurer, and a secretary. A custom officer structure can consist of a CEO, COO, CFO, president, and a number of vice presidents.
You can decide if the director will appoint officers or if they will be appointed by incorporators or shareholders.
Step 8: Provide lending details
In this section, you will state if the corporation is authorized to lend money to officers, directors or employees.
A corporation’s fiscal year-end marks the end of a one-year or 12-month accounting period. If the fiscal year end is the same as the calendar year-end, then it will be December 31. However, you are also able to choose a custom fiscal year-end date that suits your corporation’s accounting needs.
Step 10: State your conflict of interest policy
Nonprofit corporations have to provide a conflict of interest policy to their Corporate Bylaws. A conflict of interest occurs when an individual’s personal interests (i.e., family, friends, finances, intimate partners, and social activities) compromise their workplace decisions. Having a conflict of interest policy in place ensures that if one arises, proper measures will be taken.
Our questionnaire asks whether a director is disqualified from voting on issues where there’s a conflict of interest.
Step 11: Provide signing details
The last step in creating Corporate Bylaws is specifying whether the guidelines will be signed or not. If yes, you can choose if the task will fall to the directors or the shareholders.