What is a Bylaw?

• Bylaws are an organization’s internal operating rules. Any rule or law pertaining to the makeup, operation or finances of an organization appears in the bylaws. From corporate officers to stock issues, the bylaw represents the brain, spine and heart of any corporation.
  
  

Origin of Bylaws

• Thefreedictionary.com defines the word "bylaw" as a secondary law related to the word "byway," meaning a secondary route. However, the word "bylaw" was first recorded in 1283, meaning “a body of customs or regulations, as of a village, manor, religious organization, or sect.” "By-" comes from Old Norse and stems from the suffix of "-by," prevalent in the names of Scandinavian settlements in England during the Middle Ages. Both suffix and prefix mean a town or village. Therefore, "bylaw" as a set of customs for a town or village may have come to define the customs of any organization.
  
  

Bylaw Content

• Bylaws provide the "who," "what," "when," "where" and "how" of a corporation. The bylaw identifies the registered agent, board members, officers and stockholders. The “when” and “where” pertain to the location and occasion at which these individuals should meet. The “how” of a bylaw manifests itself through definitions of quorum and the rules of proxy that explain the process the officers and board members should use to arrive at their decisions. Arguably, the “what” of a corporation centers on stocks. The bylaw provides all rules concerning the stocks—from types and number of stock available to when the dividends can pay out.
  
  

Terms of Art

• The registered agent is a business or individual designated to receive service of process from a lawsuit or summons. A quorum is the minimum number of members necessary to conduct business. The Rules of Proxy determine the situations and individuals duly authorized to allow the stockholder to vote in abstentia. Finally, dividends are the payments made by a corporation to its shareholder members.
  
  

State Requirements of Bylaws

• In Washington State, RCW 23B.02.050—Organization of Corporation mandates bylaws. The statute states that “the incorporators shall hold an organizational meeting to complete the organization of the corporation by appointing officers, adopting bylaws.” RCW 23B.02.020 further requires that either the articles of incorporation, the formation documents of a Washington State corporation or the bylaw must specify the number of directors or specify the process by which the organization will establish the number of directors. In effect, the state is most interested that the bylaws at least provide the names and titles of those responsible for any wrongdoing.
  
  

Conclusion

• The bylaws are the rules governing the most general operations of a corporation. They don’t dictate the actions of the individuals who make unscrupulous investments, unethical payouts and misuse the fundamental rights recently afforded to corporations. Yet they do provide the always-vital "who," "what," "when," "where" and "how."