Corporate bylaws is a term that refers to a legal document that details the rules on how a Corporation will be governed.
This is apart from the state’s rules and regulations on how Corporations must be run and includes certain in-house guidelines and procedures.
The key benefit of having corporate bylaws is that it gives a clear direction to the board and helps avoid any potential conflict among board members. By clearly stating the rules, you can ensure everyone’s on the same page.
As such, corporate bylaws should be detailed and must cover all important aspects of running a business. That’s where this post can help you ensure you don’t miss anything important.
Let’s get started.
7 Things to Include in Your Corporate Bylaws
While most states mandate Corporations to have corporate bylaws, some don’t. In any case, it’s recommended that you draft comprehensive corporate bylaws.
If you don’t want to make any mistakes and play safe, you can hire a professional service provider like Incfile.
It will help you draft corporate bylaws, along with other services to form and run your new business. Read this detailed Incfile review by GovDocFiling to learn whether it’s the right choice for you.
If you want to do it yourself, this section covers all important components of corporate bylaws that you should include in yours.
1. Business Purpose and Key Business Information
Your corporate bylaws must have basic information about your business, such as its name, address, and contact information.
It should also have a statement of purpose, which includes answers to the following:
- What is the core purpose of your business?
- Who are its target customers?
- What solutions does your business offer?
- What makes your business different from others?
- What’s your plan for achieving your business goals?
2. Information on the Board of Directors
Every Corporation must have at least one director and preferably a board of directors. Your corporate bylaws must include the following information about the directors:
- Name and contact information
- Roles and responsibilities
- Total number of directors
- Election procedure and eligibility
- Length of terms for directors
- Removal procedure
3. Information on Officers and Shareholders
Similar to directors, you also need to provide all pertinent information related to your company’s shareholders. This includes the names of key shareholders, their shares, rights, responsibilities, and more.
If your company plans on appointing officers to manage the day-to-day business operations, you must include their details as well.
You must include:
- Names and designations of officers
- Their roles and responsibilities
- Their selection and removal process
3. Decision-Making Policies and Procedures
This is one of the most important elements of corporate bylaws, one that you can’t skip.
You must lay down clear rules and procedures for how strategic decisions will be made within the company.
Here are some things you should include:
- The decision-making process and rights
- Your company’s management structure and hierarchy
- Election and removal processes for various positions
- Process for conflict resolution
- What to do in case of conflict of interest
- Process for indemnification of officers
4. Procedure for Organizing Board Meetings
This section will lay down the rules for how board meetings will be conducted, including both general and special meetings.
Here are some things you should cover:
- When will your annual meetings be held?
- Who has the power to call a special board meeting?
- How will directors be notified of an upcoming meeting?
- What’s the procedure for holding a meeting?
- Process for adjournment of meetings
You can also include policies and procedures for other types of corporate meetings, such as shareholder meetings or officer meetings.
5. Stock Information and Issuance of Certificates
Your Corporation can choose to issue one or more types of shares, depending on whether it’s a C-Corporation or S-Corporation. A C-Corporation, for instance, can issue multiple classes of stock.
Your corporate bylaws should include information about the number and types of stock you plan to issue. You can issue common stock or preferred stock (which comes with certain rights and privileges).
Some privileges associated with preferred stock include voting rights, the right to receive dividends, protection against company dilution, the right to sell the shares, etc.
Here are some details to include in your bylaws:
- The number and class of stock that the company can issue
- Who can receive stock and how will the shares be transferred
- Whether or not you’ll be required to issue stock certificates
6. Committees and How They Will be Managed
Some Corporations choose to form committees, which include one or more directors, to tackle specific issues or perform important tasks.
The aim here is to utilize the specific skill sets of various directors. For example, if you have 2 financial experts on your board, you can form a committee to tackle the financial problems of the company.
Your bylaws should include information on:
- How committees will be formed
- When and how will they meet
- How will decisions be made
- Their roles and responsibilities
- The scope of their authority
7. Provision for Amendments to the Bylaws
Lastly, you should also include the process for making changes to the company bylaws.
Apart from the state rules, you can also include some in-house guidelines for this process. Is there written consent required for bylaw amendment from directors? Who can amend the bylaws?
Wrapping Up
There you have it—a complete list of provisions to include in your corporate bylaws.
Use this as your reference when crafting your bylaws and ensure you cover each section in as much detail as possible. And if it gets too overwhelming for you, you can always hire a professional to do it for you. Good luck!
Author Bio:
Brett Shapiro is a co-owner of GovDocFiling. He had an entrepreneurial spirit since he was young. He started GovDocFiling, a simple resource center that takes care of the mundane, yet critical, formation documentation for any new business entity.
