WHAT ARE BYLAWS?
A corporation needs rules to govern itself. These rules are called bylaws.


ARE BYLAWS MANDATORY?
If the initial directors have not been named in the Articles of Incorporation, adoption of bylaws is necessary. Whether necessary or not, it is good practice to adopt bylaws.


HOW MANY DIRECTORS CAN A CORPORATION HAVE?

A corporation may have a fixed or variable number of diectors. See California Corporations Code section 212. If variable, the maximum number cannot be greater than twice minimum number minus one. Whether fixed or variable, the following rules also apply:

The number (if fixed) or minimum number (if variable) of directors shall not be less than three; provided, however, that

  1. before shares are issued, the number may be one,
  2. before shares are issued, the number may be two,
  3. so long as the corporation has only one shareholder, the number may be one,
  4. so long as the corporation has only one shareholder, the number may be two, and
  5. so long as the corporation has only two shareholders, the number may be two.

Example 1: A corporation has three shareholders. Its board of directors must have at least three people. If it has a variable board with a minimum of say four people, the maximum number of people on the board cannot be greater than seven.

Example 2: A corporation has one shareholder. The board of directors may have one, two, three, or any number of directors. If it has a variable board with a minimum of three people, the maximum number of people on the board cannot be greater than five.


ARE ALL BYLAWS THE SAME?
No. Although the California Corporations Code has many rules that all California corporations must follow, there are some rules that may be changed. Therefore, a corporation may adopt rules to govern itself a little differently from other corporations.

Example 1: The law states that a special meeting may be called by the board, the chairman of the board, the president, or the holders of shares entitled to cast not less than 10 percent of the votes at the meeting, or such additional persons as may be provided in the articles or bylaws. Thus, by default, a vice president cannot call a special meeting. However, a corporation may state in its bylaws that a vice president may call a special meeting. This way, the corporation is changing a default rule regarding the calling of special meetings.

Example 2: The law states that the board of directors may amend bylaws, but that the bylaws may restrict or eliminate this power. Thus by default, the board is given the power to amend bylaws. However, a corporation may state in its bylaws that the board of directors cannot amend bylaws. This way, the corporation is changing the default rule regarding amendment of bylaws.

NOTE: BY USING THE Intelligent Questionnaire for Bylaws, YOU MAY PREPARE BYLAWS CUSTOMIZED WITH YOUR CORPORATION'S INFORMATION. HOWEVER, THE BYLAWS WILL FOLLOW THE DEFAULT RULES PROVIDED BY LAW. IF YOU WANT TO HAVE BYLAWS THAT DO NOT FOLLOW ALL THE DEFAULT RULES, DO NOT USE THIS WEBSITE.


WHAT BYLAWS CAN A CORPORATION ADOPT OR NOT ADOPT?
A corporation CANNOT adopt any bylaw that is in conflict with law or the articles of incorporation. Other than that, according to California Corporations Code section 212(b), the bylaws may contain any provision for the management of the business and for the conduct of the affairs of the corporation.


HOW DO BYLAWS GET ADOPTED?
The incorporator will adopt bylaws if the initial directors have not been named in the articles of incorporation. If directors have been named and elected, then either those directors may adopt bylaws, or the majority of the outstanding shares entitled to vote (as defined in California Corporations Code Section 152) may adopt bylaws.


HOW CAN BYLAWS BE CHANGED?

Pursuant to California Corporations Code section 211, bylaws may be adopted, amended or repealed by the board of directors or by a majority of the outstanding shares entitled to vote, subject to certain restrictions set forth in Section 212.

HOWEVER, the articles or bylaws may restrict or eliminate the power of the board to adopt, amend or repeal any or all bylaws. Furthermore, after shares are issued, for corporations with less than 100 shareholders, the following changes to bylaws require shareholder approval as indicated:

  1. changing the number, or maximum or minimum number, of directors requires the approval of the outstanding shares entitled to vote (as defined by Section 152);
  2. granting the board of directors the authority to fill vacancies caused by the removal of directors requires the approval of the shareholders (as defined by Section 153).


THINGS TO CONSIDER

If you use the Intelligent Questionnaire for Bylaws to prepare bylaws, you will be preparing bylaws that follow the statutory defaults. If you have NOT used the Intelligent Questionnaire for Bylaws to prepare your articles of incorporation, you should make sure that your bylaws do not have any provisions that conflict with your articles of incorporation. If there are conflicting provisions, they will need to be amended so that they do not conflict.


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