Are Your Bylaws Demode?

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Allen Matkins Leck Gamble Mallory & Natsis LLP

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Allen Matkins, founded in 1977, is a California-based law firm with more than 200 attorneys in four major metropolitan areas of California: Los Angeles, Orange County, San Diego, and San Francisco. The firm's areas of focus include real estate, construction, land use, environmental and natural resources, corporate and securities, real estate and commercial finance, bankruptcy, restructurings and creditors' rights, joint ventures, and tax; labor and employment, and trials, litigation, risk management, and alternative dispute resolution in all of these areas. For more information about Allen Matkins please visit www.allenmatkins.com.
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...
United States California Corporate/Commercial Law

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.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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