The use of corporate bylaws

The bylaws provide for many provisions, such as an annual shareholders’ meeting, and these procedures work in all states. 

An example of the use of bylaws and articles of corporation

If your corporation decides to amend its previously filed articles to authorize a new class of preferred shares to investors. The first thing to do is:

• look at your bylaws to see if it tells you the required procedures for amending your articles.

Your corporate bylaws cover the process generally, but you want to make sure you have the latest, most complete rules before you approve this important amendment. So, the second thing you would do is:

• go online to your state’s BCA (Business Corporation Act) and find a section called “Amendment of Articles.”

Your findings are:

• You see that the amendment must be approved by directors and by a majority of all the outstanding shareholders (your bylaws got this right).
• You also see that the notice of the meetings held to approve the amendment must state the purpose of the meeting. That is, the meeting notice must state that the purpose of the meeting is to amend the articles to add a new class of shares (your bylaws didn’t mention this requirement).
• You also double check your bylaw meeting provisions against the BCA meeting rules to make sure your rules for calling and providing notice of, and quorum rules for, directors’ and shareholders’ meetings are completely current, too.

It is also possible to customize your corporate bylaws by adding your own provisions to a standard corporate bylaws form. For example, a small business corporation can add one of the most common bylaws addition called “buy-sell provisions”. By sell provisions spell out what happens if one co-owner decides to sell shares or leave the corporation. These provisions are complex and require a great deal of thought.