If you are planning to form a corporation in the state of Delaware which requires many areas of legal, regulatory, or submission you must satisfy. The bylaws are the most important area to consider.
Delaware corporation Bylaws set forth the rules and procedures that govern how your corporation is to be managed. It is important that your bylaws are consistent with your business model.
Here we will gonna provide an overview of Delaware’s corporation Bylaws & discuss what you should consider engraving your own.
Delaware corporation Bylaws
The bylaws of an organization are an internal document that contains the basic operating rules, principles, formalities, and procedures that corporations must comply with to be active. The Delaware General Corporation Law requires that all corporations have bylaws.
These should be planned and drawn up as part of the incorporation process. Although the bylaws must be in compliance with the DGCL they can also contain any additional provisions that the corporation’s board of directors deems appropriate or desirable.
Bylaws for Delaware corporations can be as straightforward or complex as the board of directors desires. You shouldn’t confuse the Articles of Incorporation with Certificate of Formation. The latter only covers the basics of the corporation.
It includes the name of your company, the name of your Registered Agent, and the authorized number of shares you can issue. While bylaws provide details about a corporation’s structure, daily operations, and other details.
What purpose do corporation bylaws serve?
There are four main purposes for bylaws:
- To determine the organizational and governance procedures of the corporation.
- To manage and regulate the internal affairs of the corporation.
- To authorize the creation and delineation of various boards, commissions, and officers.
- To determine the rules for directors’ and shareholder meetings, voting rights, as well as other aspects of corporate governance.
What do you need to include in your Bylaws?
While Delaware corporation bylaws cover many different topics, there are 4 main areas that need to be addressed. These include the board of directors, officers, and shareholders. Bylaws amendments should also be addressed.
Board of Directors
Delaware General Corporation Law, (DGCL), requires that every corporation has a board to oversee its daily operations and make decisions.
The bylaws must include provisions regarding the governance, structure, operation, and administration of your BOD. This includes, but is not limited to:
- The number of directors and the ways that they can be modified.
- Description of BOD’s primary function.
- Rules and qualifications for being elected as directors.
- Specific details of their duties, responsibilities.
- Rules regarding BOD meetings: frequency and types of notice, quorum requirements, and how meetings can be held (e.g. via phone, online, or in-person).
- A declaration that the board can consent by written consent instead of meeting.
- Other information like agendas, executive commissions, and remuneration.
Officers
The bylaws will contain information on the officers (e.g. the president, secretary, treasurer) that will be responsible for the day-to-day tasks of the corporation.
- Titles and procedures for a Delaware corporation’s officers.
- Authority and duties.
- When do officers meet, and what notice is required?
Shareholders
Delaware’s Corporation Bylaws also include provisions about shareholders’ rights or privileges.
- How many shares each shareholder has the right to own?
- Questions such as ownership, stock certificates, voting rights, and classes.
- Information regarding dividends, declaration, or transfer of shares
- Details of its role & accountability.
- Rules to hold annual board meetings (e.g., date, place, and time) and other relevant information such as notice, proxy, shareholder actions, etc.
- A description of what happens to a shareholder who dies or becomes incapacitated.
- Other rights, such as the right to receive dividends, inspect corporate books and records, or election rights.
Bylaws Amendment
It’s important that the bylaws include details about how they can be changed in the future. Also, what approval is required to make such changes.
Delaware law forbids any amendment to the bylaws which would affect shareholder voting right. It requires approval by two-thirds of shares entitled to vote.
- Procedures to amend the Bylaws
- Any other principles that the corporation may establish
Need for Delaware Corporation Bylaw
Delaware corporate bylaws are essential for establishing your company for the following reasons:
Set down the guidelines and responsibilities for its members
The rules and regulations that you’ll employ to build many crucial components of your organization, like your board of directors, stockholders’ meetings, stock distribution, and even the implementation of record-keeping systems, are created by your bylaws. It could further help you prevent unneeded disagreements that could otherwise slow down your organization or lead to legal issues in the future.
Demonstrate the legitimacy of your company as a corporation
Bylaws for corporations are recognized as official records. Your corporation’s bylaws will support the limited liability feature of your company in the event of a legal dispute.
Conclusion
Delaware corporate bylaws are legal documents that govern your corporation’s operations and provide an organizational structure. Bylaws provide guidelines for how directors and officers are appointed, what shareholder meetings are held, and how to handle conflicts of interest.
If you’re planning to start a corporation in Delaware or even you want to know about the procedure, don’t hesitate to get in touch with us. We are Odint Consultancy of highly experienced professionals who are ready to help you with all of your business requirements.
FAQ’s
While Delaware statutes may imply the existence and necessity of bylaws, it doesn’t say that they are required. DE Code SS 109 says that bylaws “may” be adopted. However, bylaws are vital for a functioning corporation.
You must have a board if your startup is a Delaware-incorporated corporation. The Delaware General Corporation Law states that every Delaware corporation’s business and affairs must be managed or overseen by a board.
The charter describes the purpose of the non-profit and is also known by the articles of incorporation. The bylaws describe the rules and regulations the organization must follow.
The purpose of these bylaws is to guide and direct the decisions and actions of the non-profit board. They help to avoid or resolve disagreements and conflicts. They protect an organization’s reputation by clearly stating the rules surrounding authority, rights, and expectations.
The following details are frequently included in Delaware corporation bylaws:
- Name and location of the company
- The objective of the organization and the strategy you’ll use to achieve it.
- Voting methods
- Information about stockholders
- Board of Directors & Officer details
- Meeting guidelines
- Regulations for potential bylaw amendments
Delaware mandates that all corporations have bylaws. The Bylaws have to be made, kept, and adhered to even though they are not required to be filed publicly.
