Corporate bylaws are the basic set of rules and regulations that govern a corporation. They are generally enforceable as a contract among the various members of the company. A typical set of corporate bylaws will outline important matters, such as how the corporation is to be operated, as well as the leadership roles of different members.
State laws may vary widely concerning corporate bylaws. In most cases, corporate bylaws are mentioned in state laws as a part of the “corporate formalities checklist” that a business needs to satisfy in order to register as a corporation with the state. However, it is important to understand that corporate bylaws, often simply referred to as by-laws, are important to the efficient operation of any corporation. They help to prevent legal disputes and can provide guidance in the event that a dispute actually does arise.
The exact requirements for corporate bylaws will differ according to state laws, as well as the needs of each individual company. A corporation’s bylaws will typically contain:
- The name of the corporation
- The objective(s) of the corporation
- Who the different members are/will be
- The names of directors, officers and important members
- Terms for when a general meeting can be held, and what constitutes a meeting
- Terms for special meetings, executive board meetings, special committees, etc.
- Provisions regarding corporate purchases, transactions, take-overs, etc.
Again, the purpose of corporate bylaws is to provide the organization with a written set of regulations that will guide the company’s operations. Bylaws usually become effective when they are formally adopted by the company.
Corporate bylaws are generally enforceable as a contract between the members of the corporation. Violations of corporate bylaws can have the following consequences:
- Internal liability: Members may have to render a damages award for losses to other members within the corporation, depending on the violation.
- External liability: A member may become liable for losses that the violation caused on behalf of the corporation to a third party.
- Criminal liability: In some cases, violations of corporate bylaws can also involve criminal charges, which can lead to criminal fines and/or jail time.
Thus, corporate bylaws also provide some degree of legal protection and accountability for the members of the corporation. For this reason, it is important that the bylaws be drafted by a person or party who is experienced with corporate bylaws, such as a corporate or business lawyer.
The laws governing corporate requirements are very different from state to state. If you have any questions or need assistance with corporate bylaws, it is essential that you contact a business lawyer immediately. Your lawyer can help draft, review, edit, and revise your organization’s bylaws. In the event that a lawsuit arises, your lawyer can help defend your corporation’s interests.