Every corporation, whether for-profit or nonprofit, should have a living, breathing set of bylaws.
Bylaws are the DNA of a corporation. While articles of incorporation can set out important, basic parameters and while state corporation laws provide boundaries and certain default provisions on many issues, bylaws speak to the day-to-day functioning of the organization – as well as to potentially momentous, life-changing decision-making regarding the organization’s future.
Some practical questions that bylaws can answer or pre-empt are:
• Who runs the place – day to day? What officer roles exist and what responsibilities are within each officer’s purview? Is there a president, a CEO or both? Which does what? Who has authority to sign contracts on behalf of the corporation, to sign checks over a set threshold amount? Is there a vice president? Is there an assistant treasurer? … What does each do?
• Who makes the life-changing decisions? When it comes time to merge or sell, who is entitled to vote? Must there be a shareholder meeting with a supermajority winning the day? Can the directors decide on a simple majority? Are there classes of stock entitling some to vote, but not others? Is the nonprofit a membership organization with all members entitled to receive notice and vote?
• What formalities are to be met? Is an annual meeting of shareholders and or directors to be held at the headquarters of the corporation each April 1? Who can call a special meeting? Who should receive notice of the meeting? What constitutes a quorum at a meeting? Who can vote? Are proxies to be used? Who is tasked with updating and filing the annual report of the corporation with the secretary of state? Are out-of-the-ordinary-course matters to be handled with written consents of directors or shareholders? Is this a closely held corporation operating without a board?