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Importance of Corporate Bylaws for San Diego Corporations
If you are running your San Diego business through a corporation or if you are thinking of starting up a new San Diego corporation, your company must have bylaws. Here are a few important facts about San Diego corporation bylaws.
San Diego Corporate Law: What are Bylaws?
Corporation bylaws are the set of rules and procedures that govern the way your corporation runs at the highest level – the level of shareholders, directors, and senior management. For example, the bylaws set out what the corporate officers are, some combination of President/CEO, Vice President, Secretary, Treasurer/CFO, vice Treasurer, and more. The bylaws also establish the number of directors, the rules with respect to amendments and/or changing the bylaws, how meetings are called, and more. One might think of bylaws as “framework” or the “constitution” for the corporation. As an aside, bylaws are different than “articles of incorporation.” The articles are the document that creates the legal entity of the corporation. Bylaws, on the other hand, tend to be 10 to 40 pages long, depending on how detailed the company’s founder wants to be.
San Diego Corporate Law: Importance of Custom-Drafted Bylaws
It is important to have bylaws custom-drafted by a skilled and experienced corporate attorney. The preprinted bylaws are not necessarily written specifically for California corporations and do NOT deal with the unique and special needs of YOUR corporation. Some of the more common issues that should be made part of well-drafted bylaws include:
- Full statement of corporate purpose — that is, what is your business doing; the articles state a general purpose; the bylaws should expand on that, but the purpose should not be stated too narrowly to allow the company to grow and expand
- Shareholder ownership rights — for example, classes of stock, voting restrictions, transfer restrictions, etc.
- Manner and use of proxies
- How officers and directors are elected and removed
- How stock can be issued — both for the initial stock and future stock issues; plus question of stock splitting
- The number and eligibility of directors and officers — different than the manner of election and removal
- Duties of various corporate directors and officers — importantly, limitations should be considered, such as requiring shareholder approval for certain corporate actions.
- Rules with respect to shareholder and board meetings — frequency, where, quorum, virtual or phone attendance allowed, etc.
San Diego Corporate Law: Bylaws are Still Subordinate to California Law
As important as bylaws are for how a corporation is governed, it is important to remember that bylaws cannot overrule California law. As Cal. Corp. Code § 212(b) states: “The bylaws may contain any provision, not in conflict with law or the articles for the management of the business and for the conduct of the affairs of the corporation …” Thus, the purpose stated in your bylaws cannot allow the company to engage in illegal activity. Likewise, your bylaws cannot absolve directors and officers of their fiduciary duties that are imposed by California law.
Contact San Diego Corporate Law Today
As can be seen, custom-drafted bylaws are important. For more information, contact San Diego Corporate Law. Every corporation needs experienced and trusted legal counsel like attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard proudly serves the San Diego business community, offering a full range of legal services to his business clients and can provide advice and assistance with corporate bylaws and other aspects of corporate governance. Mr. Leonard can be reached at (858) 483-9200 or via email.
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