What are bylaws? (Section 45 to 47, Revised Corporation Code)

Summary

In this video, Attorney Chris Batan Lasko simplifies the concept of corporate bylaws. He explains that bylaws are the rules that govern a corporation’s internal affairs, distinct from articles of incorporation. The video covers how bylaws are adopted, the necessary approvals required, and the filing process with the Securities and Exchange Commission (SEC) to make them effective. It also explores how bylaws can be amended or repealed, including the process of delegating amendment power to the board of directors. The video aims to clarify these legal processes in under 10 minutes for easier understanding.

Takeaways

• 😀 Bylaws are the internal rules and regulations of a corporation that govern its operations and the roles of stockholders, officers, and directors.
• 😀 Bylaws are separate from the articles of incorporation, which is the foundational document required for the creation of the corporation.
• 😀 The adoption of bylaws can happen after incorporation or, in some cases, even before, provided they are approved by all incorporators.
• 😀 Bylaws are considered a contract between the corporation and its stockholders.
• 😀 The adoption of bylaws requires a majority vote of the stockholders or members, based on the corporation type (stock or non-stock).
• 😀 Once adopted, the bylaws must be signed by the stockholders and filed with the Securities and Exchange Commission (SEC) to become effective.
• 😀 Special corporations like banks, insurance companies, and public utilities must also submit certifications from the relevant government agency to confirm the bylaws align with special laws.
• 😀 Section 46 of the Revised Corporation Code lists what may be included in the bylaws, such as meetings, compensation, qualifications of directors, and penalties for violations.
• 😀 The bylaws can be amended, repealed, or replaced through a majority vote of stockholders or members, with a higher vote threshold required if the power is delegated to the board of directors.
• 😀 If the bylaws are amended or new bylaws are adopted, they must be filed with the SEC and certified to be in accordance with the law to become effective.
• 😀 Delegating the power to amend or adopt new bylaws to the board of directors requires a two-thirds vote, while revoking this delegation only requires a majority vote from stockholders or members.

Q & A

What are bylaws in a corporation?

Bylaws are the rules and regulations adopted by a corporation to govern its affairs. They direct the actions of stockholders, officers, and those managing the corporation's business.

How do bylaws differ from articles of incorporation?

Articles of incorporation serve as the fundamental law of the corporation and are filed before incorporation. Bylaws, on the other hand, are adopted after incorporation and serve as supplementary rules that guide the management of the corporation.

Can bylaws be viewed as a contract?

Yes, bylaws can be viewed as a contract between the corporation and its stockholders, defining the rights and duties of the stockholders, officers, and directors.

When can a corporation adopt its bylaws?

A corporation can adopt its bylaws either before or after incorporation. After incorporation, a majority vote of the stockholders is required to adopt the bylaws, but they may also be adopted prior to incorporation by submitting them with the articles of incorporation.

What is required for the adoption of bylaws?

The adoption of bylaws requires the affirmative vote of at least a majority of the outstanding capital stock (for stock corporations) or a majority of the members (for non-stock corporations). After approval, the bylaws must be signed and submitted to the Securities and Exchange Commission (SEC) for certification.

What happens if the bylaws are not approved by the SEC?

Bylaws become effective only upon approval by the SEC. If the SEC does not issue a certification, the bylaws will not be considered effective, regardless of the approval by stockholders or members.

What specific types of corporations require additional certifications before SEC approval of their bylaws?

Corporations such as banks, insurance companies, public utilities, and other entities governed by special laws must submit additional certifications from the appropriate government agencies to confirm their bylaws are in compliance with relevant regulations.

What can be included in the bylaws of a corporation?

The bylaws can include rules for calling and conducting meetings, quorum requirements, voting procedures, qualifications and duties of directors, and other operational guidelines, including penalties for violations and compensation of officers and directors.

Can a corporation amend or repeal its bylaws after they are adopted?

Yes, a corporation can amend or repeal its bylaws or adopt new ones. This requires approval from the board of directors and a majority of stockholders or members, similar to the adoption process.

Can the power to amend or repeal bylaws be delegated?

Yes, the power to amend or repeal bylaws can be delegated to the board of directors or trustees. This requires a two-thirds majority vote of the stockholders or members. However, stockholders or members can revoke this delegation with a majority vote.