What are bylaws?

TLDR: The bylaws establish many of the rules and procedures for operating a company and are typically closely-tied to the state statutes governing the operation of a company.

The two main governing documents of a corporation are its charter (called the “certificate of incorporation” in Delaware and the “articles of incorporation” in California) and its bylaws.

Unlike the charter of a corporation, which is required to be on file with the Secretary of State in the corporation’s state of incorporation, the bylaws of a corporation are generally not filed with the state. Instead, the bylaws can be adopted, amended, or repealed by the corporation’s board of directors or by vote of the corporation’s stockholders, and are kept with the corporation’s books and records. However, the bylaws must be consistent with the corporation’s charter and the corporate laws of the state in which the corporation is incorporated.

Delaware law allows for a corporation’s bylaws to contain any provision relating to the conduct of the corporation’s business, so a corporation’s bylaws could contain, among others, rules around the following topics:

• The place, time, and frequency of meetings of the board of directors and stockholders of the corporation
• Procedures for calling meetings of the board of directors or stockholders
• Quorum requirements for actions taken by the board of directors or stockholders
• The authority and responsibilities of the board of directors and officers
• Procedures for electing directors and dealing with resignations and vacancies on the board of directors
• The ability of the corporation to indemnify its directors and officers
• Notice and reporting requirements
• Procedures for maintaining corporate records
• Voting procedures
• Procedures and restrictions on transfers of stock

Careful observance of a corporation’s bylaws is a key element of good corporate governance. In some situations, acting in violation of a corporation’s bylaws can render such actions invalid. For example, actions taken by the board of directors at a board meeting without a quorum, as prescribed by the bylaws, are invalid.

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