Sunday, March 30, 2008

Maintaining Your Corporate Status in California - Part 4

This is Part 4 of an ongoing series designed to provide California corporations general information on how to maintain their corporate standing. In this edition, we will review the roll and function of corporate bylaws.

Next to the Articles of Incorporate, the corporate bylaws are the most important corporate document. They set forth matters affecting the Shareholders' and Directors' rights, as well as corporate Officers' authority. In addition, they establish the basic administrative rules for the day-to-day legal operation of the corporation, including the procedure for altering the number of Board of Directors members; the calling of, conduct of, convening of, and voting of Board of Directors' meetings and Shareholders' meetings; the election, powers and duties of the corporation's Officers; the issuance of certificates representing shares of the corporation's stock; general financial authorizations; and the procedure for amendment of the Bylaws.

While the Bylaws may be viewed as merely the implementation of a number of corporate formalities, they are essential to resolve potential future problems, as well as to evidence the corporation's adherence to its Articles and other legal requirements. As a practical matter, however, they do not impose any significant operational burdens so long as the shareholders continue to be in basic agreement on corporate directions that the Bylaws may be amended by action of the Directors except an amendment to the Bylaws changing the number of Directors which must be made by the Shareholders.
In essence, the Bylaws are the Constitution for the corporation. The Directors should be familiar with the provisions of the Bylaws or consulting an experience corporate attorney for assistance.

The information provided in this article is general information only and is not intended as legal advice. DO NOT use this information as a substitute for obtaining qualified legal advice or other professional help.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

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