One of the crucial elements of starting a new corporation is drafting its bylaws. Bylaws are the rules by which the corporation will be governed on a day-to-day basis and typically cover such matters as what is required of shareholders, directors, and officers.

Bylaws should typically be drafted as early as possible, typically prior to the first meeting of the corporation’s board of directors. Generally, the corporation’s attorney will either draft the bylaws or make sure it’s one of the first actions undertaken by the board of directors.

A key distinction should be made between bylaws and articles of incorporation. The articles of incorporation will cover information related to the organization of the corporation, which are required by state or territorial law and include basic information, such as names and addresses, but not the structure or operations of the corporation. Another key point is that bylaws private to corporation whereas the articles of incorporation must be filed with the Office of the Lt. Governor, Division of Corporations and Trademarks and are available for public inspection.

Some of the information covered in the articles of incorporation is likely to be covered in the bylaws as well. As a general rule of thumb, here are some items that should be addressed in corporate bylaws:

  • Basic information such as the name of the corporation, its address and where it will operate.
  • Information related to the board of directors, generally covering the composition of the board, election of directors, and how vacancies will be filled.
  • A list of officers of the corporation and their respective responsibilities and powers.
  • Information about stocks, including stock types and classes of shares.
  • Rules and procedures related to meetings of shareholders and directors, including when and where such meetings will occur and what will happen when they do.
  • Rules establishing the corporation’s record-keeping procedures.
  • Information guiding the process of amending both the bylaws and the articles of incorporation.

Just like with the initial document, any changes to the articles of incorporation must be filed with the Lt. Governor’s Office whereas changes to bylaws do not require that the public be informed Nevertheless, a corporation’s bylaws should establish a very clear procedure for amending their amendment, including who is responsible for proposing and approving the changes.

As corporations grow and change, making amendments to the bylaws will likely become necessary. It’s a good rule of thumb to plan on revisiting your corporation’s bylaws on a regular basis, perhaps at the annual meeting. Whether you’re in the process of establishing a corporation and need assistance with writing the bylaws, or you’ve come to a stage where the bylaws need to be amended, consulting an experienced and knowledgeable corporate attorney is in your company’s best interests.

Steven K. Hardy is Chair of the Corporate, Tax and Estate Planning Practice Group at BoltNagi PC, a full-service business law firm based on St. Thomas, U.S. Virgin Islands.