Two Issues Your Company Bylaws Need To Address

Posted on: 11 September 2017


Your corporate bylaws provide a detailed roadmap for how your company will operate, so it's important to ensure they cover all the essential issues you're likely to encounter in the course of doing business. There are so many issues to consider, however, that it's easy to overlook a few. Here are two you need to be sure to address when writing your company bylaws:

Conflict of Interest

It's not unusual for people in your organization to be involved in multiple aspects of the business. For instance, the CEO may run the company and be involved in committees designed to address specific business needs. However, it's important that you take care to avoid any conflict of interest issues that could cause the company to run afoul of the government or result in adverse outcomes for the business.

For example, anyone on the board of directors should be barred from voting on policies or measures in which they may benefit from financially. Not only can this conflict of interest lead a director to vote in a way that may actually hurt the company, but you could be fined by the IRS or other government entity overseeing this type of issue.

Clearly spell out what represents a conflicting interest, who's prohibited from engaging in them, and the procedures for what people need to do if such conflicts manifest themselves.

Changing the Bylaws

It's a certainty that your business needs will change over time. As such, your bylaws should evolve right along with your company. Thus, it's important that you implement a system for adding, changing, or eliminating bylaws as needed to ensure they suit the company's goals and needs.

For example, your company growth requires you to increase the number of people who may sit on the board of directors and the minimum number of directors who must appear at meetings to vote on the issues at hand. Putting a process in place ensures you can make these necessary changes with minimal drama and confusion.

Be aware, though, that you shouldn't make it too easy or difficult to change your bylaws. Going to the extreme in either direction will cause innumerable problems. If it's too easy to change the bylaws, you may end up with people making unnecessary alterations that only hurt the company and waste time, for example. Be sure to consult with other experts who can help you develop a fair process that works for your company.

For more information about creating company bylaws or help with other legal issues, contact a corporate lawyer.