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Corporate Bylaws – What’s Required?
Corporate Bylaws are the rules and regulations enacted by an association or a corporation to provide a framework for its operation and management. Bylaws provide for meetings, elections of a board of directors and officers, filling vacancies, notices, types and duties of officers, committees, assessments and other routine conduct. Corporate Bylaws are, in effect a contract among members, and must be formally adopted and/or amended.
While the Articles of Incorporation define the basic structure of the corporation, the bylaws are used to further define this structure. Corporate Bylaws can contain any provisions not inconsistent with state law or the Articles, relating to the business of the corporation, the conduct of its affairs, and the rights and powers of the shareholders, directors, officers and employees.
Bylaws – unlike the Articles of Incorporation – are not recorded in the public records. Each set of bylaws will be specific to each organization, but the basic components of corporate bylaws are as follows:
- Statement of Purpose: Pretty straightforward here. What does your business do? Why are you in business? How will your corporation reach it’s goals? Basically your statement of purpose describes what you do and why you do it.
- Members: Here you’ll address the types of members your corporation wishes to have, as well as their voting rights and any procedures for adding new members to the corporation.
- Board of Directors: Corporate bylaws commonly include information that specifies, for example, the number of directors the corporation has, how they will be elected, their qualification, and the length of their terms. It can also specify when, where, and how your board of directors can call and conduct meetings, and voting requirements.
- Shareholders’ Meetings: One of the most important requirements a corporation has is its annual shareholder meeting. This bylaw will outline exactly when shareholders are entitled to receive notice with regards to shareholder meetings, and where and on what date meetings will take place.
- Stock and Dividends: This is where you will codify into your corporate law, exactly who will be entitled to receive stock in the company, the different classes of stock that will be issued and to whom, and how the transfers of stock shall be made.
- Officers: Officers are generally employees of a corporation, although they don’t always have to be. Your bylaws should include provisions for electing and appointing officers, and to specify whether or not these officers will be board members and what responsibilities they will have.
- Indemnification: To indemnify someone is to absolve that person from responsibility for damage or loss arising from a transaction. You’ll most likely want to include a provision that protects your corporation’s directors and officers from any liability that they may be exposed to because of their association with the corporation.
- Amendments: The only thing that stays the same is change, and in this case, adding an amendments provision to your corporate bylaws will allow your corporation to review and change any necessary rules or regulations as challenges arise.