What are Byelaws?

Byelaws are a set of internal rules within an organisation that help govern how it should function. These laws help clarify the roles of different individuals and give structure to the company.

Byelaws are laid out in a formal document that is later adopted by the board of directors. They briefly mention the hierarchy of the organisation and the procedures for voting and making decisions at board level. Byelaws are there to ensure that even in the event of a change, the company functions on a sound foundation of consistent processes.

Content of byelaws

Byelaws specify the purpose and structure of an organisation. Here are the core components of byelaws:

1. Organisational structureThe management structure and the process for filling a vacancy at a high level are always defined in the company byelaws.

   • Board of directors

     Critical information about the board of directors is specified, including its duties, authority, who can serve as a member and the process of electing a chair.

   • Officers
   • The byelaws specify the officers as the key management executives responsible for executing the daily activities of a company. They also include the rules for choosing officers.

2. MeetingsByelaws specify when and how often board and shareholder meetings should be conducted.

   Board meetingsThis section sets the rules for calling, scheduling and conducting board meetings.

   Shareholder meetingsThis section states when to conduct shareholder meetings and how to notify investors of these meetings.

3. Voting ProceduresThis component states the voting rights of board members and the company shareholders. 

   QuorumCompany byelaws often specify that a quorum is required to vote at shareholder and board meetings. What constitutes a quorum differs depending on the organisation.

   Majority voteByelaws also state how to proceed in the absence of a quorum. In some cases, a simple majority of the members present in a meeting will constitute a quorum.

4. Duties and responsibilities

   The duties of board members and officers are specified in this section of the byelaws.

   • Board of directors

     Board members are directed to perform supervisory duties, facilitate strategic planning, attend board meetings and vote on motions.

   • Officers

     The officers of a company are required to serve under the board and execute the duties it sets.

5. Amendment procedure

   It is important to include this section in the byelaws to specify the process for making changes to them.

Adoption and enforcement of byelaws

After the company produces its byelaws, the board of directors has the option to accept or amend them.

• The adoption process: The board holds the first meeting to adopt the byelaws by voting.
• The amendment process: Members can post an amendment proposal. The board votes on each proposed amendment, accepting or rejecting the suggestion.
• Enforcement mechanisms: Byelaws are enforced by the board of directors. In case of a breach, it can take legal action against the person or persons responsible for the breach.