Corporate Bylaws

Bylaws are one of the most important aspects of any company, or indeed any institution regardless of size. They are the governing documents, a set of guidelines and rules that you must follow.

Corporate bylaws are created at the time a company is incorporated. Bylaws are, in essence, a ruling document that established how a company will be run and how it will operate. Bylaws widely vary from organization to organization, but generally cover topics such as the purpose of the organization, who are its members, how directors are elected, how meetings are conducted, and what officers the organization will have and a description of their duties.

What are Bylaws?

The legislature regulates what bylaws may contain, including the general make-up them. This ensures that companies will follow established fair and open practices, elect their board of directors in a suitable fashion and set out practical rules for adopting new rules or removing directors etc.

Smaller companies often adopt standard, government-drafted bylaws. As a company grows and perhaps even receives multiple shareholders bylaws are often heavily amended to reflect the new structure of the company. How bylaws can be amended should always be outlined within the articles of incorporation or the bylaws themselves. 

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Election Procedures & Election guidelines

If your company does not yet support online voting, you may need to vote to change these regulations in the bylaws. How you can change your bylaws depends largely on the guidelines established in the articles of incorporation and the bylaws themselves. Most companies require bylaw changes to be voted on by the board of directors.

This can be done at a regularly scheduled meeting, like an AGM or by an independent meeting by the board. For the bylaws to be changed, the directors usually have to reach a quorum and have a certain percentage of members vote in favor of the change.  Again, this will be established in the guidelines.

Do not forget to give proper notice to all voting members, or the result may be declared as invalid. 

Shareholders' Rights

Selecting candidates for your company's board of Directors, therefore, ultimately comes under the power of the board. The board needs to be able to ensure that they are capable of working with new board members, that they have excellent background credentials and that they will provide a benefit to the company, and ultimately the shareholders in the near future.

The shareholders are, however, the party responsible for electing board members. The voting rights of shareholders depends largely on whether their shares have voting rights attached or not  - and therefore how the company was established in the first place. Large Multinational Corporations like Google or Facebook do not grant their shareholders voting rights. This practice is that common as the management team and board of directors have to be trusted enough for shareholders to willingly invest without any say on the direction of the company.