How to Create and Change Corporate Bylaws
Corporate bylaws are the most important corporate document because they contain the rules that govern the internal workings of a corporation. Bylaws typically state the rights, duties and liabilities of the members of the corporation, as well as the rules relating to transferring and selling shares. Bylaws also typically contain terms related to the duties of the board of directors and corporate officers of a corporation. Bylaws are typically created by the incorporators who formed the corporation or the board of directors. The bylaws may be amended later by the board of directors according to the procedures and voting rules set forth in the articles of incorporation or certificate of incorporation. A majority vote or supermajority vote of all shareholders may be required to amend the bylaws.
What is Included in the Bylaws
The following topics are the most commonly included articles in the corporate bylaws:
- Name - The name of the business that will be registered as a trade name should be decided upon.
- Object - The purpose of the business and where the headquarters will be located is described. In the case of a nonprofit corporation, it is important that the business purpose is for a common good in order to qualify for tax-exempt status, corporate grants, loans, and other benefits.
- Members - Any qualifications for membership, procedures for selecting, disciplining, and removing members, along with their voting rights and categories of membership, should be stated.
- Officers - The officers are the executive positions in charge of specific duties, such as President, CEO, Treasurer, etc. The duties, powers and term of office should be detailed. The procedures for removing an officer and filling a vacant office should be described.
- Meetings - The date, time, and location of any annual, regular, or special meetings is described. Also included are any notice and attendance requirements, as well as the number of votes to constitute the quorum needed to pass a matter voted upon.
- Executive board - A conflict of interest provision should be included, for example, requiring directors to remove themselves from voting on matters in which they have a direct, personal stake in the outcome.
- Committees - Any special committees created may be named here.
- Parliamentary authority - The rules for running and recording meetings are usually determined according to Roberts Rules of order.
- Amendment - Rules for updating and amending bylaws should be specific as to who may recommend amending a bylaw and how the amendments will be voted on.