What are Bylaws?

The bylaws of a corporation are the “play book” for the rules of corporate governance. The bylaws also constitute a contract between the shareholders and the corporation, as well as a contract among the shareholders. In essence, then, the bylaws are a set of rules for the management of the corporation’s business, the control of its officers and agents, and the rights and duties of the shareholders among themselves and with respect to the corporation.

A corporation does not have to adopt bylaws, but if it does, the bylaws must be reasonable and not in conflict with law or the company’s articles of incorporation. In California, the only provision that a corporation’s bylaws must contain (unless the provision was already included in the company’s articles of incorporation) is the number of the corporation’s directors, which can be a range between a stated minimum and maximum. See Cal. Corp. Code § 212. Other than that, the bylaws may contain any other provision for managing the corporation’s business and conducting its affairs, including: (1) reasonable restrictions on the shareholders’ right to transfer or hypothecate their shares; (2) the time, place, and manner of calling, conducting, and giving notice of meetings of shareholders, directors, and/or committees; (3) the qualifications, duties, and compensation of directors, the time of their annual election, and the requirements of a quorum for directors’ meetings; (4) the appointment and authority of committees of the board; (5) the appointment, duties, compensation, and tenure of officers; (6) the making of annual reports and financial statements to the shareholders; and (7) the manner of executing, revoking, and using proxies.