How to Write Company Bylaws: Everything You Need To Know
Knowing how to write company bylaws is key to explaining your company's leadership structure and the general governance of the company's affairs.3 min read
Knowing how to write company bylaws is key to explaining your company's leadership structure, the relationship with shareholders and the general governance of the company's affairs.
Bylaws dictate operational procedures and standards that a corporation follows throughout its existence as a business entity. It generally outlines what the company can and cannot do. Bylaws address the specific duties of a company's directors and officers, the processes for amending the bylaws, procedures for meetings and other considerations.
Bylaws control the evolution of a business and may outlast or overshadow the role of the company's founder. As such, they should be written to last.
Bylaws are useful in providing procedures for a range of governance issues including establishment of committees, membership responsibilities, removal of board members, and selection of officials.
It should contain the following elements:
- Identifying information of the corporation — name, address, official address/principal place of business.
- The number of corporate officers and directors that the corporation must elect/appoint.
- Type and number of stock classes and shares that the corporation can issue.
- Procedures for shareholder and director meetings including protocol, location, and frequency.
- Procedures for corporate record keeping including the rules for inspection and preparation of records.
- What constitutes a conflict of interest to the corporation
- The procedures for amending bylaws and articles of incorporation.
Bylaws for a new corporation are usually created by the person(s) who initiated the process of incorporation (the incorporators). They may also be drafted by the new board of directors when they've been constituted.
The bylaws usually address the reasons for existence and primary goals of the corporation.
When drafting corporate bylaws, the corporation's general information usually comes first. This includes the name of the company, officers and directors, as well as its location.
There should be sections outlining where and when shareholders and directors meetings are to be held as well as a clause stipulating that board meetings may be called as needed. The bylaws should speak to the rules for proxies and what constitutes a quorum for voting purposes.
The bylaws should also spell out the responsibilities and day-to-day duties of the company's officers. As such, the exact content of corporate bylaws is usually unique to each corporation.
No Government Filing
Although a company's article of incorporation is filed with the Secretary of State in its jurisdiction (or other similar filing agency), bylaws are not filed at all. They form part of the business records of corporations and may be disclosed to creditors, potential investors and other stakeholders, once the need arises.
If drafted properly, corporate bylaws can help corporations along the path to success. To get it right the first time and ensure that it covers all the necessary angles and legal bases, it's best to work with an experienced business attorney near you.
After detailing the corporation's general information, what comes next is the leadership structure. Write an article identifying the executive leadership and each position. The full titles of the officers and the responsibilities they must uphold must be spelled out. Specify if the officers are to hold their positions indefinitely. If not, the bylaws should contain the maximum terms of office.
It is important to state the hierarchical relationship between each office so that everyone understands the proper chain of command. State the procedures that must be followed when an officer wants to leave the office as well as the rules governing election/appointment of a replacement.
If the corporation requires standing committees, the bylaws should state the names, powers, and purposes of the committees as well as the procedures and membership requirements for filling and vacating the committee. The role of shareholders must also be detailed in the bylaws. Detail the types of stock that the corporation offers, the rights and responsibilities of shareholders and the company's limitations on capital stock.
Your corporation's bylaws must comply with federal, state and local law. Areas that are not covered by the bylaws automatically comes under general applicable law. The bylaws should serve as the guiding legal document to be consulted when disputes arise on the board, in the executive leadership or between these two groups.
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