Bylaws
Best Practice Summary

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Bylaws prescribe provisions that govern a corporation's internal affairs in a manner that is not otherwise inconsistent with state laws or the charter. Initial bylaws are adopted by the Incorporator and/or initial board of directors depending on state laws of the state of incorporation.

Standard Bylaw Provisions

Principal office and/or Registered Office
Location of the principal office and/or registered office may be provided in the bylaws. A change in principal address and/or registered office of the company requires a resolution of the board of directors.

Stockholders

Annual Meetings
The actual date, time and place of annual stockholder meetings may be provided in the bylaws or the directors will be empowered to fix the date. State laws may provide that the annual meeting be held within a certain period of time after the fiscal year end. Bylaws should properly reflect statutory requirements.

Special Meetings
Special meetings are called for any purpose that may occur after the organizational meeting and in between annual meetings. Bylaws provide the manner of calling a meeting, the notice required and any other formalities.

Notice of Meeting
Written notice of the meeting must be given to stockholders within the time defined in the bylaws. If the notice has not been given, state laws and the bylaws may provide that stockholders may sign a waiver of notice to satisfy the requirement.

Informal Action or Action without a Meeting
Bylaws may provide that stockholders may taken action by written consent of the majority of stockholders entitled to vote and/or by unanimous written consent. Before proceeding with written consent of stockholders, state laws and the bylaws should be checked for appropriate provisions.

NOTE: If an action has been taken by majority of stockholders without a meeting, notice would still be required to be sent to minority stockholders notifying them of the action taken.

Closing of Transfer Books or Fixing the Record Date
In anticipation of a meeting and for the purposes of determining holders of record entitled to notice or to vote on any proposed action, the board of directors may authorize that the stock transfer books be closed for a stated period of time so that stockholders of record may be determined.

Quorum
Quorum is the minimum number of stockholders required to approve an action. Bylaws will specifically define quorum which is generally a majority of outstanding shares of the corporation entitled to vote, presented in person or by proxy.

Authorization for Voting by Proxy
A stockholder may vote in person or by proxy executed in writing by the stockholder of his, her or its duly authorized attorney-in-fact.

Voting of Shares
If different classes and series of stock have been issued by the corporation, class designations, rights, privileges and restrictions may be contained in the bylaws rather than in the charter.

Directors

Bylaws will provide authority for directors to manage day-to-day business. In addition, bylaws provide for the following:

Directors Election, Vacancies and Removals
Stockholders appoint and remove directors. Bylaws will prescribe the manner of removing a director, with or without cause, as well as provisions for filling vacancies created by resignation, death or removal. Directors may be empowered by the bylaws to fill vacancies in the board by a majority of directors then in office.

Number, Term and Qualifications of Directors
State laws of the state of incorporation may provide that the corporation must have a certain number of directors in relation to the number of stockholders or some other required number. Bylaws should properly reflect statutory requirements. Otherwise, bylaws will prescribe the number of directors, terms in office, qualifications, board classification, if any and other director responsibilities and authority.

Classification of Directors
To ensure continuity of a board of directors, provisions for a classified (or staggered) board may be provided for in the bylaws. When this occurs, directors are split into two or more classes (e.g. Term A and Term B Directors or Class I and Class II Directors) and the term of each class is staggered so that only a one class of directors, rather than the entire board, will be elected at each annual meeting rather than electing the entire board each year. Each director’s term is for a number of years equal to the number of classes (for example, if there are three classes, each director has a three-year term). The classes are usually equal or roughly equal in size, but need not be.

Directors' Annual Meetings
Annual meeting (also known as the Regular Meetings of Directors) is held immediately following the Stockholders' Annual Meeting.

Directors' Special Meetings
Special Meetings of Directors are called for any reason that may occur in between annual meetings. Procedures for calling meetings, notice requirements and other provisions are contained in the bylaws pursuant to state laws.

Directors' Notice of Meeting
Written notice of a meeting must be given to directors within the time defined in the bylaws. If the notice has not been given, bylaws may provide that directors may sign a waiver of notice to satisfy the requirement.

Directors' Informal Action or Action without a Meeting
Bylaws may provide that directors may take action by written consent of the majority of directors entitled to vote and/or by unanimous written consent. Before proceeding with a written consent of directors, laws and the bylaws should be checked for appropriate provisions.

Quorum
Quorum is the minimum number of directors required to approve an action. Typically the majority of directors will constitute the quorum for transacting business at a meeting. Bylaws will provide the required quorum.

Director Compensation and Payment of Expenses
Directors may or may not receive compensation for serving on a board. Provisions for compensation or lack thereof will be contained in the bylaws of the corporation usually to be determined and authorized by a resolution of directors or stockholders.

Executive Committees
Bylaws may provide for the board of directors to establish and delegate some powers to committees. As deemed necessary by the board of directors, committees may be established to oversee certain matters such as an Executive Committee, Audit Committee or Compensation Committee. The committee will have the powers as provided in the bylaws and the resolution of directors.

Dividends
The board of directors is granted the power by law, the charter and the bylaws, to declare and pay dividends, which are distributions to stockholders of cash, property and/or stock of the corporation.

Officers

The bylaws will provide the titles and responsibilities of the officers. Statutory offices are typically the President, Treasurer and Secretary. Other officers such as Vice President, Assistant Treasurer, Assistant Secretary will be provided for in the bylaws. In addition, the bylaws will define:

Election and Term in Office
Officers are typically elected at the annual meeting of directors and therefore are in office for a term of one year unless he/she earlier resigns, dies or is removed.

Removal, Vacancy and Resignation
Bylaws prescribe the manner of removing an officer, with or without cause, as well as providing the manner in which vacancies created by resignation, death or removal will be filled.

Compensation of Executive Officers
Directors generally authorize compensation of executive officers and procedures for authorization may be provided in the bylaws.

Authorization of Officers
Generally, officers are authorized to act on behalf of the corporation by a resolution of directors which may be explicit or general.

Indemnification of Directors and Officers
Indemnification of directors and officers may be provided in the bylaws or the charter to the extent provided by law.

Certificate for Shares

The form of stock certificate may be described in the bylaws and/or provided that directors will approve the form of stock certificate. In all cases, the form of stock certificate must be the one described in the bylaws or the latest form authorized by the directors.

Bylaws may also provide that stock be uncertificated, meaning that stockholders will not receive a stock certificate as evidence of stock ownership but rather ownership is recorded on the stock record books and tracked by the corporate secretary or transfer agent. The form and manner of tracking and transferring shares of the corporation is also prescribed in the bylaws.

Stock Restrictions

S Corporation
Maintaining S corporation status requires certain stock restrictions. S Corporation restrictions may be contained in the bylaws.

Professional Corporations
The stock of professional corporations is typically restricted by law from issuance to persons who are not licensed professionals in the relevant profession. Such restrictions may also be listed in the bylaws.

Note: Other restrictions on stock that are considered not to be permanent may also be provided for in the bylaws rather than the charter. Amending the bylaws is easier and less expensive than amending the charter.

Transfer Agent

The secretary is typically responsible for stock issuance and the transfer records. The company may also appoint a transfer agent who will be responsible for maintaining the stock transfer records book, issuing new stock and/or transferring issued stock as well as maintaining a current list of names and addresses of all stockholders.

Execution of Documents

Bylaws may provide that officers are authorized to execute certain documents such as leases, notes, checks, drafts deeds and others, except as directors may otherwise provide.

Control Share Acquisition and
Business Combination Acts

Many states have business combination or control share acquisition statutes that essentially limit business combinations between corporations, persons and groups holding more than a certain percentage (typically 15% or more) of its voting stock in public companies and companies with more than a certain amount of stockholders. If a corporation is, or is likely to become, subject to these statutes, consideration should be given to inserting an opt-out clause in the bylaws if it has not been inserted in the charter. A sufficient opt-out clause is:

"The provisions of [chapter or section] of the [cite laws] Law shall not apply to this Corporation."

Fiscal Year End

The fiscal year end of the company may be provided in the bylaws or the bylaws may prescribe that the fiscal year end will be fixed by the directors.

Corporate Seal

A description of the corporate seal is provided for in the bylaws.

Miscellaneous Bylaw Provisions

Amendments and Restatements

Amendments
Bylaws may be amended in accordance with provisions in the state laws, charter and the bylaws. Once the appropriate action has been taken, the amendment is noted in the bylaws in the following manner:

If the amendment is minor (such as the change of fiscal year end) the amendment should be noted by writing the date of the resolution at the top of the bylaws (i.e. "Amended [date]") and noting the change in the margin of the appropriate article.

A major amendment (such as the addition of a new section or article) may be referenced by substituting the document with a revised copy and noting at the top of the new document "Amended [date resolution was taken]". Superseded copies should be marked "Superseded [date of resolution taken]" and maintained chronologically in the minute book for historical purposes.

Restated Bylaws
Restated bylaws are inserted in the minute book as a new copy of the bylaws entitled "Restated Bylaws [date resolution was taken]". Superseded copies should be marked "Superseded [date]" and for historical purposes maintained in the minute book behind the latest version of the bylaws.

Corresponding resolutions amending the bylaws are filed in the minute book in chronological order.

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