Don’t Ignore Your Corporate Bylaws
If you have a business, and that business has investors, shareholders, or a board of directors, you probably have bylaws. If you are like so many business owners who see bylaws as a nuisance or an unnecessary burden, you may have simply used a form to fill out your bylaws that you purchased from the store, or worse, that you downloaded for free online.
Bylaws are Critical
Bylaws are a crucial part of the operation of even a smaller business. Your bylaws dictate the powers of your officers, and provide a guidebook as to how your company will be run. In the event of a dispute between you and your shareholders or your board of directors, a court will look to your bylaws first to see if you are complying with them. In that way your bylaws actually have the force of law and can be thought of as a “mini legal code” that you create for your business.
Bylaws can determine who can serve as a member of your board of directors, how long they can serve, and when a member’s term ends. Bylaws can also dictate how a board member can be removed. This can be an important provision. It is not unheard of to want to remove a board member who has conflicts with your company, or who simply makes your life as the owner of your business difficult.
Bylaws can help you run your business as you see fit. Many times, bylaws will say that a board has the authority to “manage the affairs of the company” or contain similarly vague language. This can be interpreted to mean that they, and not you as president or owner, make daily decisions. This can lead to the inability for a business to function if there is debate over who has authority to sign corporate agreements, set corporate policy, or take the business in a given direction.
Bylaws can and should be written more specifically to provide you the authority to make the decisions that you need to make to run your company and to avoid the problems that micromanagement by multiple board members tends to cause.
Bylaws Help in Emergencies and Provide Flexibility
Bylaws can also help you in emergency situations. You may think that in an emergency you as the president or owner have the authority to do whatever you need to do to protect and preserve the company’s interests. That may not be true, unless the bylaws authorize you to take such actions.
In many cases, actions taken during emergencies are later challenged as being unauthorized for a failure to follow policies set forth in corporate bylaws that deal with emergencies and emergency meetings.
Many people think having bylaws will restrict their ability to run their company. This is not the case. Your bylaws can provide as much control or flexibility as you want to provide. Having good bylaws in place just officially authorizes your ability to exercise the degree of control that you need to effectively manage your company.
Make sure your business documents are comprehensive and allow you the ability to get the job done. Contact Tampa corporate and business attorney David Toback to discuss reviewing your business’ documents.