How to Draft Corporate Bylaws

Newly incorporated businesses are often required or strongly urged to draft a set of corporate bylaws to provide the organization with a system of rules and regulations for conducting the various tasks and operations of running a corporation.

The bylaws establish procedures for electing directors and board members, establishing the responsibilities of officers and determining how meetings should be conducted, among a multitude of other corporate operations.

Because the drafting of bylaws establishes a corporate structure and organizes the entity in an efficient and operable manner, it is in the interest of corporations - particularly members that are not directly involved in day-to-day operations such as board members and shareholders - to draft the bylaws upon completion of the Articles of Incorporation.

However, it is important to note that, unlike the Articles of Incorporation, corporate bylaws are not filed with any public agency or government entity; they are purely for internal use and reference. Nonetheless, they should be filed in a private, corporate registry and be available for all shareholders, employees and board members to view. Shareholders or other corporate members may even cite the corporate bylaws as evidence in potential civil suits and should therefore be drafted with this possibility in mind.

Additionally, the bylaws should never be in conflict with local, state or federal laws, as such regulations will supersede the corporation's in all circumstances.

While the structure and nature of bylaws tend to vary according to location, industry, size of the corporation and other factors, they are generally formatted to include:

• Name, address and location of business.
• Names and contact information for all directors and corporate officers.
• Type of stock and number of shares to be issued by the corporation.
• Location and frequency of directors' meetings, as well as shareholders' meetings.
• Procedure for keeping corporate records.
• Actions to be taken if the bylaws need to be amended.

While these points provide a general idea of what should be included in the corporate bylaws, large companies will need to draft a more thorough and extensive collection of rules, as such a task is in the interest of shareholders, in particular. Small businesses, on the other hand, will likely benefit from a simpler structure.

Whatever the size of the company, the bylaws should be flexible or broad enough to change or evolve according to expansion, market shifts, acquisition and other major changes in operation.

All officers and corporate members have an obligation to be familiar with the content of the bylaws and to act in accordance with them.

Article I - With the Articles of Incorporation on hand for reference, put down the company's full name and include alternative or abbreviated names as well.

Article II - Declare the purpose and basic function of the organization. The Articles of Incorporation, which should include this same description, can be included.

Article III - This section should include all matters of personnel, including board members, officers and other active participants or proprietors. More importantly, it should describe how such members are admitted or hired to these positions, the rules for doing so and the procedures for relinquishing such positions. Article III should also reference any and all tax considerations in relation to these processes.

Article IV - Outline the roles and responsibilities of all officers involved in the organization. These positions usually refer to members with direct control over administrative and operational procedures, such as chief executive officer, chief operating officers, presidents, chief financial officers and other major players. Like members listed in Article II, no specific names should be provided, as the bylaws indicate how the entity as a whole should operate, excluding all personal or individual involvement.

Article V - Include all matters of voting or electing members to the board or executive positions. It should establish how votes or elections should proceed, the type of majority required and whether primaries or other preliminary elections and procedures should be included.

Article VI - This article should describe how meetings are to be conducted - who can call them, when they should take place, what should be accomplished and what role voting should hold in such gatherings. This is also a good section to include how voting procedures should be used to address issues left out in the bylaws or Articles of Incorporation.

Article VII - Reference measures for amending, altering or adding to the corporate bylaws. This section should include who can introduce such amendments and how the process and rulings will be publicized to the rest of the organization.In most circumstances, amendments to bylaws will be discouraged. So when drafting the rules, it is important to include or foresee any matters of contention that could arise from the enforcement of the bylaws.

Article VIII - This final section should include all other matters that may be of interest to shareholders, employees, directors, executives and all other members of the corporation.

Upon completion of the bylaws, they should be delivered to the officers, board members or any other relevant individuals for review and subsequent drafting. Once the review process is finished, the corrections or changes should be made, providing members with full disclosure of the revisions.

Finally, all members must vote on the bylaws, whereupon they will be officially and permanently enacted, thereby providing the corporation with a structural basis for operations.