Are Your Bylaws Demode?
Friday, July 15, 2022

While the California General Corporation Law contemplates that corporations will have bylaws but does not explicitly require that they do.  See Are Bylaws Required?  In my experience, it is extremely rare to come across a corporation that has not adopted bylaws. There are many good reasons for doing so.  For example, bylaws will be necessary if the articles of incorporation do not specify the number of directors.  Also, several provisions of the GCL may be overridden by the bylaws (i.e., Section 312(b), 601(e), and 1501(a)(1)). 

Nonetheless, lawyers have developed a practice of drafting bylaws that essentially regurgitate numerous provisions of the GCL.  The justification for this practice is that "long form" bylaws provide a ready reference guide for directors, officers and shareholders.  However, this assumes that the bylaws are kept up to date and in many cases they may not be.

For example, the legislature amended Section 601 of the Corporations Code with respect to notices of shareholder meetings.  2021 Cal. Stats. ch. 523, § 4.  Those changes took effect on January 1 of this year.  In March, the legislature amended Section 600 with respect to shareholder meetings.  2022 Cal. Stats. ch. 12, § 1.  Because that legislation was enacted as an urgency statute, it took effect immediately.  As a result, many bylaws may no longer track these statutes.  

Therefore, the convenience of "long form" bylaws may be illusory because the bylaws may be out-of-date because of legislative changes.

 

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