California corporate bylaws are internal documents that outline the rules and procedures governing the operation and management of entities incorporated in the state. They establish how the corporation will be managed, including protocols for holding meetings, electing officers and directors, issuing shares, and making critical business decisions.
These bylaws are typically drafted after the filing of the articles of incorporation with the California Secretary of State. While they are not required to be submitted to any governmental body, they are a necessary component of the incorporation process. The board must maintain an up-to-date copy of the bylaws, accessible for review by shareholders, at the corporation’s head office.
Legal Requirements
While not mandated by law, corporations are strongly encouraged to adopt bylaws, especially if the number of directors is not specified in the articles of incorporation. [1] Further relevant requirements to consider include:
- Annual Meetings – This includes provisions on the time, place, and manner of conducting these meetings, ensuring that the corporation adheres to legal requirements and internal governance rules regarding shareholders’ rights and participation. [2]
- Corporate Bylaws – If initial directors are not named in the articles of incorporation, the incorporators have the authority to adopt and amend bylaws until such time as directors are elected. [3] [4] [5] [6]
- Issuance of Stock – Before shares are issued, the number of directors can vary based on the number of shareholders, and after shares are issued, any changes to the number of directors require approval from the outstanding shares, except that reducing the number below five requires approval by a significant majority of shareholders. [7]
Naming Considerations
- Required Words: “Corporation,” “Incorporated,” “Limited,” or an abbreviation thereof (the requirement applies to close corporations only).
- Prohibited Words: “Bank,” “Trust,” “Trustee,” or related terms without proper authorization.
- Name Reservation Period: 60 days.
- Renewal Period: State statutes are silent.
- Transferability: Yes.
Emergency Bylaws
Corporations can establish emergency bylaws that govern business operations during natural disasters, terrorist attacks, or wartime declarations. In an emergency, the board is empowered to take any necessary or appropriate action to address the situation, mitigate its effects, or comply with lawful government orders without requiring shareholder approval unless previously obtained.
Corporate actions undertaken in good faith per the emergency bylaws are binding on the corporation and do not hold corporate directors, officers, employees, or agents liable. [8]
