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The function of corporate bylaws

On Behalf of | Jan 29, 2024 | Business Law

Corporations in Maryland and throughout the country are generally required to have bylaws. These are a subset of rules that typically clarify where the company is located, who is in charge of the business and how certain rules can be changed. Bylaws may also stipulate who gets to vote at shareholder meetings or take other actions within the organization.

The initial corporate meeting

The company’s first bylaws are proposed before the initial owner’s meeting. At that time, they are either ratified, rejected or altered depending on the wishes of eligible stakeholders within the company. After they are adopted, they can typically be changed as long as they don’t conflict with statutory provisions such as those found within the Articles of Incorporation. At the initial meeting, the company may also issue shares of stock or complete other tasks related to ensuring that the organization is properly structured.

Changing corporate bylaws

In most cases, bylaws can be changed either by shareholders, board members or both. However, there are two situations in which they typically cannot be altered. The first scenario is when changing a bylaw would put it in direct conflict with language contained within the incorporation documents. In addition, bylaws cannot be in conflict with state or federal business statutes or any other applicable laws. If either of these are true, it may be necessary to either make changes to incorporation documents or amend a bylaw so that it conforms to the law.

Adequate governance is among the keys to a successful company. Without proper protocols, it may be harder to instill confidence in investors, employees and others who are associated with the company. A lack of governance may also leave the organization vulnerable to breaking state or federal finance or other corporate laws.