Bylaws

Corporate bylaws are a necessary aspect of corporate formation. They are the rules by which the corporation operates, and as a result they must be drafted with great care and with the appropriate mechanisms for their amendment when necessary.

First note the difference between bylaws and Certificate of Incorporation; corporate bylaws are more like the daily rules that the corporation must follow; whereas, the Certificate of Incorporation provide a broad outline of the corporation and often will be filed with the Secretary of State. Having said that, bylaws for startups are generally boilerplate documents.

Bylaws will typically cover important information, including, but not limited to, an organization’s name, purpose and location, the number of members of the Board of Directors, the various committees operating within the corporation, the officers that run the corporation, the meetings to be held, procedures when conflicts of interest arise, and procedures for amending the bylaws.

Board composition is a particularly critical aspect of the bylaws, given that the Board of Directors retains the highest level of control over corporate operations, and is only subject to the shareholders in limited circumstances. The corporate bylaws will typically spell out how Board vacancies will be filled, as well as the minimum and maximum number of board members to complete certain activities and votes.

Bylaws will also normally define the various officer roles including President, Vice President, Treasurer and Secretary, and will describe in detail how people are chosen to serve in these roles, how long they can serve, and the circumstances under which they can be removed. Officers, like members of the Board of Directors, are responsible for overseeing corporate operations at a high level, and so the procedures by which they are retained and removed are critical to consider carefully when organizing a corporation. Elections are a common way for such individuals to be selected, though bylaws can technically provide for selection of officers and Board members by other means, at least to the extent those means do not conflict with the corporate law of the state of incorporation.