Brown Borkowski & Morrow


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The importance of corporate bylaws

Business law can be complex in the state of Michigan. Corporate bylaws, for one, can be quite confusing for a layperson to understand. Their purpose may not be clear to most people, even those considering taking their companies public. However, they are absolutely crucial for a functional corporation.

The blueprint for a corporation

Without corporate bylaws, you really wouldn’t have an operational corporation. It is those bylaws that help give structure to the entire institution. Corporate bylaws should cover things like:

  • a statement of purpose
  • types of members in your corporation
  • voting rights
  • procedures for adding new members
  • disciplinary procedures
  • how and when meetings will be conducted
  • provisions related to the board of directors
  • provisions regulating annual shareholders’ meetings
  • rules regarding the makeup and operation of committees
  • how stock should be issued and transferred

This list, of course, is only a starting point. Overall, the bylaws will be used as a blueprint for how the corporation will operate after its founding.

Mistakes to avoid with corporate bylaws

With how important bylaws are to the governance and operation of a corporation, serious mistakes made when drafting these bylaws can come back to haunt the company. Some of the biggest pitfalls many businesses have fallen into include:

  • making amending the bylaws too difficult
  • not regularly reviewing the bylaws
  • not being stringent enough regarding rules for employee contracts
  • not including enough rules for shareholders’ meetings

Business law can be quite tricky. If you are not thorough enough in drafting your bylaws, you will certainly invite litigation. This could be lawsuits from customers, investors, employees and even members of the corporation itself.

Overall, corporate bylaws are extremely important. They help dictate how a corporation should be structured and run. If not drafted adequately, they could invite serious problems that could ultimately cause the company to fail. Give them the importance they require.