Kiritsis & Associates

 

Why Corporate Bylaws bring a rigid management structure to Corporations, especially closely held Corporations, when compared to their LLC and Partnership counterparts?

 

John Kiritsis, Esq., CPA, MBA, MS, JD, LL.M

 

Kiritsis Law Group   

212 922 0005

 

A slew of cases that may be coming to the benches of New York State’s Court of Appeals, may leave an everlasting impact on how corporate bylaws are to be drafted, negotiated and/or adopted by the pertinent underlying parties?


 

Corporate bylaws are a set of rules and guidelines that govern the internal affairs of a corporation. Corporate bylaws outline the rights, duties, and responsibilities of the corporation's directors, officers, and shareholders, and provide a framework for the management and operation of the corporation. In this article, we will explore the key elements of corporate bylaws, the process for adopting and amending corporate bylaws, and the benefits of having well-drafted corporate bylaws.

 

Key elements of corporate bylaws

Corporate bylaws typically include the following key elements:

 

• Purpose of the corporation: The corporate bylaws should outline the purpose or mission of the corporation, which is typically stated in the articles of incorporation.

• Structure of the corporation: The corporate bylaws should outline the structure of the corporation, including the roles and responsibilities of the directors, officers, and shareholders.

• Meetings and voting: The corporate bylaws should outline the rules for holding meetings of the directors, officers, and shareholders, as well as the procedures for voting on matters related to the corporation.

• Dividends and distributions: The corporate bylaws should outline the rules for paying dividends or distributions to the shareholders of the corporation.

• Amendment of the bylaws: The corporate bylaws should outline the process for amending the bylaws, which typically requires the approval of a majority of the directors or shareholders.

 

Process for adopting and amending corporate bylaws

The process for adopting and amending corporate bylaws typically involves the following steps:

 

• Draft the bylaws: The corporation's founders or directors may draft the initial set of bylaws, or the corporation may hire an attorney to draft the bylaws.

• Approval of the bylaws: The bylaws must be approved by the corporation's directors or shareholders, depending on the structure of the corporation.

• Filing of the bylaws: In some states, the corporation may be required to file the bylaws with the state.

• Amendment of the bylaws: The bylaws may be amended at any time, subject to the approval of the directors or shareholders and any filing requirements.

 

Benefits of having well-drafted corporate bylaws

Having well-drafted corporate bylaws can provide several benefits to a corporation, including:

 

• Governance: Corporate bylaws provide a framework for the governance of the corporation, including the roles and responsibilities of the directors, officers, and shareholders.

• Decision-making: Corporate bylaws outline the procedures for making decisions related to the corporation, including voting procedures and quorum requirements.

• Conflict resolution: Corporate bylaws can help to prevent and resolve conflicts within the corporation, by outlining the rules for handling disputes and resolving issues.

• Credibility: Having well-drafted corporate bylaws can enhance the credibility and professionalism of the corporation, which can be attractive to investors and partners.

• Legal protection: Well-drafted corporate bylaws can provide legal protection for the corporation and its directors, officers, and shareholders. In a legal dispute, the bylaws can be used to demonstrate that the corporation was operating in accordance with its own rules and procedures.

 

In conclusion, corporate bylaws are a set of rules and guidelines that govern the internal affairs of a corporation. Corporate bylaws outline the purpose, structure, meetings and voting, dividends and distributions, and amendment of the bylaws. The process for adopting and amending corporate bylaws involves drafting the bylaws, obtaining approval, and possibly filing the bylaws with the state. Having well-drafted corporate bylaws can provide several benefits to a corporation, including governance, decision-making, conflict resolution, credibility, and legal protection.


 

 

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