5 Things to Include in your Company by-Laws

Company by-laws are documents which state the dos and don’ts of the organisation. They encapsulate the organisation’s structure, operations, and the day-to-day rules for the smooth functioning of the organisation. Every company has a different set of by-laws depending on their functions, ownership, and type of industry. A lot of people tend to confuse the Articles of incorporation with the company by-laws. Articles of incorporation is a public document whereas the company by-laws are only given to the employees. If you’re looking forward to getting your company by-laws written, then here are a few things you should surely incorporate into your document:

1) The Basics

All company by-laws mention the organisation’s name, statement of purpose and location. This is the basic information of any company. It is mostly the first chapter of the document. While drafting your statement of purpose, ask yourself,

  • Why are you in the business?
  • Who are your customers?
  • What is your offering to your customers?
  • What is your unique selling point?

It is important to articulate your statement of purpose well if you’re an NGO looking for a tax exemption status. In order to do things the right way, hiring a lawyer is always the best option.

2) Board of Directors

Your company by-law should be inclusive of information regarding the board of directors of the company. The composition of the board of directors and the minimum and a maximum limit of board members should be stated in this section. It should also specify how vacancies are filled and the qualifications for being a director, the duties done by them, the term they have to serve and the procedure for removing a board member.

3) Committees

Mention the committees that exist in your organisation. Specify how they are formed and what are their duties. Discuss the roles and responsibilities of the ‘Executive committee’ that reports directly to the board of directors. Committees are formed so that the company can benefit from the expertise of the committee members. There are standing committees which run all the time and the ad hoc committees which are temporary. Organisations have certain kinds of committees such as executive, finance, fundraising, compensation, audit, and others.

4) Amendment of Bylaws

Your bylaws should include the rules and procedures to amend the bylaws. It should also mention who can amend the bylaws and under what circumstances can it be done. It is important that bylaws are updated at least every 5 years. This way the information mentioned in the company by-laws will accurately represent the organisation and its membership.

5) Conflict of Interest

Under this section, the board of directors and the member of the organisation will have to specify their conflict of interests. This then gives a clear picture of the topics that can be discussed by those directors and what can be done to avoid the conflict of interest.

At Prowse Chowne, our legal experts have expertise in the area of corporate law. We can help you draft a professional company by-law.