Overview of General By-Law

 

What is this document?

This corporate by-law, often referred to as “By-Law No. 1”, is a by-law that is approved by the directors and shareholders of the corporation once the entity has been incorporated. It outlines general corporate matters, including financial year-end, the roles of directors and officers, and meetings of the directors and the shareholders.

 

When would I use this document?

This document is one of the two standard by-laws that are usually approved shortly after a corporation has been incorporated. It is approved in conjunction with the Borrowing By-Law, also known as “By-Law No. 2”. It is one element of the corporation’s minute book.

 

Who signs this Agreement?

This by-law is signed by the Secretary of the corporation and then approved in a resolution signed by the directors,  and in a resolution signed by the shareholders of the corporation. If any shareholder is not an individual, but rather a corporation or other entity, it will be signed by an authorized signing officer on behalf of the corporate shareholder.

 

More details about this document:

It is important that this document be approved in resolutions signed by both the applicable directors and the shareholders. The directors enact the by-law while the shareholders confirm the by-law. In practice, this can often be the joint resolutions of one sole director and shareholder in the case of a small business.

Once approved, this document should be kept safely as a record in the corporation’s minute book. This will be an important document for the internal governance of the corporation. As such, the drafter should take care to read, understand, and customize the by-law as needed.

To avoid confusion in the future, it is important to ensure that there are no inconsistencies or conflicts between the Articles of Incorporation and the By-laws. For example, the by-laws and the Articles should be consistent with each other with respect to the number of directors required, and this should also correspond to the actual number of directors named.

 

What are the core elements of this document?

The core elements include: Financial Year, Board of Directors, Committees, Meetings of the Board of Directors, Standard of Care and Protections for Directors and Officers, Officers, Meetings of the Shareholders, Quorum, Signing Authority, Voting Majorities, Shares and Transfers, Record-Keeping, and Notices.

Depending on how detailed the by-laws are and the needs of the corporation, the by-laws can contain clauses related to matters which are often included in shareholders ‘ agreements, such as Inactive Shareholders, Right of First Refusal, Minority Representation on the Board etc.

 

Related Documents

Minute Book – this is where the corporate records are kept.

Directors’ Resolution – Director’s have to enact the by-law with this resolution.

Shareholders’ Resolution – Shareholders are required to confirm the by-law.

Borrowing By-Law – a by-law authorizing the directors to borrow on behalf of the corporation

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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