Bylaws of Corporations


The term "bylaws" can apply to many different types of institutions and bodies. For example, cities, townships, villages, government bodies, unions, organizations, and companies can all have bylaws. However, in this article, we’re going to explore bylaws within corporations.

The bylaws are the "meat and potatoes" of a corporation. In other words, the only way to really understand how a particular corporation operates is to read its bylaws. Also, many people confuse the bylaws of a corporation with its articles of incorporation. Bylaws are very different from the articles of incorporation.

In this article, we’ll explore the purpose of bylaws, how bylaws differ from the articles of incorporation, what you’ll likely find in the bylaws, and how bylaws operate as the foundation of every corporation.

Next, let’s take a look at the purpose of bylaws.

Purpose of Bylaws

There are generally 2 main types of corporations: (i) public and (ii) private. Both types of corporations have bylaws. But the differences in bylaws between public and private corporations, as well as the size, function, management style, and laws that apply to corporations can dramatically change the bylaws. With that said, corporations in similar industries (e.g. auto industry, computer industry, etc.) tend to have somewhat similar bylaws as other similar corporations.

The purpose of bylaws is to direct the inner-workings of a corporation. In other words, the bylaws set forth the day-to-day functions of a corporation. But make sure that you don’t confuse bylaws with laws. Non-sovereign bodies like corporations pass bylaws, while sovereignties pass actual laws. A sovereign is a supreme lawmaking body like a country or state (e.g. a country like the United States or a state like Texas). Non-sovereign bodies, like corporations, get their power to pass rules from the sovereign in which they operate. For example, a corporation that forms bylaws in Florida must follow federal law from the United States because it’s a sovereign nation, and the corporation must also follow Florida state law because it is a sovereign state.

Next, we’ll go over how bylaws differ from the Articles of Incorporation.

How Bylaws Differ from the Articles of Incorporation

As already mentioned, the bylaws are the "meat and potatoes" of a corporation. The bylaws set how the corporation runs on a day-to-day basis.

Here is a simple way to remember the differences between the bylaws and the articles of incorporation. If you think of a corporation as a picture, with a frame, the frame represents the articles of incorporation and the actual picture represents the bylaws. So, the articles of incorporation set the framework for the corporation, while the bylaws are the actual picture of what really happens.

Bylaws are also private documents that are not filed with any government agency, while the articles of incorporation are public documents that must be filed with the state agency where the corporation becomes incorporated (e.g. with the state’s secretary of state). As such, articles of incorporation actually cost money to file with the state, while the bylaws are free to create (assuming you do not pay a lawyer to create them for you).

Next, we’ll go over what you’ll likely find in the bylaws.

Contents of Bylaws

Okay, now that you have a basic understanding of what the bylaws are, let’s take a look at what you’ll likely find in the bylaws.

The bylaws are the GUTS of how a corporation works. If you’ve never seen bylaws before, you’ll likely find many new words and concepts that sound foreign to you. Don’t worry about it. The main point of this article is to give you an overview about the bylaws and expose you to some new concepts. If you have to read this section a few times to better understand it – it’s well worth the effort.

For others that have learned about corporate structures and bylaws, this may be very basic. That’s okay too, as you can skip this section or use it as a general overview about what you already know.

The bylaws of each corporation will vary, sometimes dramatically, depending on the type, size, function of the company, and the state in which the company is incorporated (as each state has different laws). With that said, let’s take a look at the internal components of a corporation – its bylaws.

The bylaws will generally discuss topics such as:
  • Offices
  • Directors
  • Directors’ Meetings
  • Shareholders
  • Shareholders’ Meetings
  • Officers
  • Corporate Records
  • Transfer and Issuance of Shares
  • Indemnification
  • Miscellaneous Provisions
  • Amendments
Next, we’ll go over each of these topics in more detail.

Contents of Bylaws – in More Detail

Now, let’s take a look at the sections of the bylaws in more detail:
  • Offices
    • Will generally state where offices are located or can be located, such as the corporation’s headquarters and/or other facilities
  • Board of Directors
    • State who the directors are or how they will be elected
    • State the number of directors
    • there must always be at least 3 directors in a corporation, unless there are less than 3 total shareholders in the corporation, in which the directors must equal the number of shareholders (e.g. if there are only 2 shareholders in a corporation then there must be 2 directors)
    • Define how vacancies are filled
    • Determine compensation, if any
    • Explain how conflicts of interest will be handled
  • Conflicts of Interest
    • The term conflict of interest is a broad term and there can be much said about this term
    • In general, however, a conflict of interest arises when a director may benefit from a corporate decision (e.g. corporation wants to buy property owned by a director)
  • There must be specific provisions to determine how to handle different conflicts of interest
  • Directors’ Meetings
    • Place of meetings
    • When and how to hold regular meetings
    • When, how, and where to hold special meetings
  • Special meetings
    • Special meetings are held for a particular purpose, such as to buy another business
    • When, how, and who can give notice of special meetings
    • Quorums for meetings, i.e. how many directors must be present to make business decisions at meetings
    • How to adjourn a meeting, i.e. end the official business of the meeting
  • Shareholders
    • Define the shareholders
    • Set a record date for which persons are considered to be shareholders
  • Shareholders’ Meetings
    • Sets all the parameters for how shareholder meetings shall be conducted, including (similar to directors’ meetings):
      • Place of meetings
      • Time of meetings
      • How to call special meetings, and define what special meetings are, and explain who can call special meetings (e.g. shareholders with 20% or more ownership in the company)
      • How to give notice of shareholders’ meeting to the shareholders, including when notices must be given and in what formats
      • Define quorums for the shareholders’ meetings, i.e. the minimum number of shareholders required to have a meeting (e.g. a simply majority = 50% + 1)
      • How to vote for directors
      • How proxies work for shareholders, i.e. how others can vote for a particular shareholder if that shareholder cannot make it to the meeting
  • Officers
    • Set the number and titles of the officers
    • Officers can include (but are not limited to):
      • President
      • Chief executive officer (CEO)
      • Chief financial officer (CFO)
      • Treasurer
      • Secretary
      • Vice Presidents, e.g. VP of Public Affairs
        • Explain the duties of each officer’s position
        • Explain how officers are elected (usually by the board of directors on an annual basis)
        • Explain how vacancies will be filled
  • Corporate Records
    • How the minutes of the corporation’s meetings will be maintained – the minutes refer to the documentation of the meetings
    • How the share register will be maintained – the share register is simply a log that keeps track of who owns what shares
    • How, when, and why shareholders can inspect the corporation’s official records and documents
    • When financial statements and annual reports may be issued to shareholders – in order to show the shareholders how the corporation is doing financially
    • Determine the fiscal year of the corporation – a fiscal year can differ from the calendar year
  • Transfer and Issuance of Shares
    • Explain if there will be different classes and/or series of shares
    • Explain how shares will be paid for (only cash, or also by services, property, etc.)
    • Whether the corporation will issue share certificates, i.e. copies of ownership in the corporation
    • Explain any types of restrictions on transfer of the shares (e.g. shareholders cannot transfer shares to third parties without first offering the shares to the current shareholders – this is called the right of first refusal)
    • Define how to properly transfer, i.e. sell, assign, or otherwise convey shares
  • Indemnification
    • How, when, and why the corporation will indemnify (i.e. protect) directors, officers, and others if a third-party files a lawsuit against them
    • Explain how the corporation will pay for indemnification of individuals
  • Miscellaneous Provisions
    • Derivative lawsuits
      • Explain how shareholders can file derivative lawsuits against the corporation – a derivative lawsuit is one which a shareholder files against the corporation for a particular act or omission of the corporation
    • Insurance
      • Explain if the corporation will insure certain individuals like top-level officers, directors, and/or employees
      • A corporation might purchase insurance for an individual in case that individual leaves the corporation – which could be very costly and time consuming to find a replacement
    • Emergencies
      • Explain how emergencies might be handled, as with fires, floods, etc.
  • Amendments
    • How the bylaws can be amended based on certain voting procedures
    • How new bylaws may be passed by the corporation
    • *Amendments generally require a supermajority vote in order to be passed (e.g. 66% or more) and generally cannot simply be voted on by the board of directors
That may seem like a lot to consider, especially if you’ve never dealt with these types of issues before. So, you may want to read this article again to better internalize the information this article has to offer.

Finally, we’ll finish this article with an overview of what we’ve discussed.


In this article, we focused on the bylaws in a corporation, as opposed to a government body, organization, or other institution. We looked at the purpose of bylaws, how bylaws differ from the articles of incorporation, and what you’ll likely find in the bylaws in some detail.

The key to remember is that the bylaws differ from the articles of incorporation. The bylaws are the "meat and potatoes" of the corporation, as they set forth how the corporation really operates. In contrast, the articles of incorporation set the basic framework of the corporation (like a picture frame).

The next time someone talks about bylaws and articles of incorporation interchangeably, you’ll know better. You’ll know the differences between the bylaws and articles of incorporation and have a decent idea of what you should find in a corporation’s bylaws.

© 2009-2010 ThinkingLegal, LLC. All rights reserved.