What happens if there is a disagreement as to the meaning of the bylaws?

Corporate bylaws should be drafted to convey their meaning as clearly as possible, but disagreements may occur no matter how carefully the bylaws are written. The bylaws constitute a contract between the shareholders and the corporation, as well as a contract among the shareholders. As such, if there is a disagreement as to their meaning, the bylaws are construed according to the general rules for the construction of contracts. In general, bylaws must be given a reasonable construction and, whenever possible, a construction that will sustain their validity. Applying this rule, because bylaws may not conflict with law or the company’s articles of incorporation, where a bylaw is reasonably susceptible of different constructions, one in harmony and the other in conflict with a statute or the articles, the former construction will normally be adopted.

If a bylaw is not in conflict with law or the articles, but there is still a question as to its meaning, other rules of contract construction come into play. If the language of the bylaws is clear and explicit, then that language controls over any unstated intent in drafting the bylaws. The words of the bylaws should usually be understood in their ordinary and popular sense, rather than according to their strict legal meaning, unless used in a technical professional or business sense. Dictionary definitions of a particular word are useful to determine its ordinary and popular sense, but the meaning must still make sense in the context of the bylaws as a whole. If the meaning of a bylaw is still unclear, then any construction that the corporation’s principals gave to the bylaw, as shown by their actions, before any controversy arose as to its meaning, is important evidence of what the bylaw means.