Bylaws and Corp Code

Answers to those pesky questions about California Codes and Other Good Stuff

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Bylaws and Corporation Codes - What are they and why do we go nuts over them? The answers here are directed at the Mutual Benefit Corporations in California.

California and the Secretary of State insist you sign a contract with them if you want to be a Corporation. They tell you what they want, which is set in stone. They also give you some options, not set in stone. As long as it is lawful and not against the codes, you may also add things to clarify your business contract with the State. If you are a Corporation, you have signed the contract.


Meetings must be held, and is part of the contract made with the State of California. The State gives you an option as to where and when you will have the meeting. You have the option to say meetings will be held at Headquarters. You also have the option to say meetings will be held at the Secretary's house. This is legal, but what if Jane, the Secretary resigns or the next Secretary says "no meetings at my house thank you." Now you have to fix the bylaws or be in violation of those bylaws.

Giant Behemoth International Corporation is in a position to always have meetings at Headquarters because they can fly the little Behemoth's to Headquarters in Los Angeles, Tokyo, Dubai or London. If you are not sure about a regular meeting place, you may make a contract with the State saying the meeting place and time will be announced. All the procedures for announcing meetings are written in stone in the Corporation Codes.

 

President Chief  CEO  Board Director or Governor

California wants you to have a President. At our fictional corporation the President is called the "Grand Poobah." Usually we just call him "Poobah" at meetings and between ourselves. Even our contract with the water delivery service was signed by George, the Grand Poobah.

The Secretary of State recognizes the word "President" and makes references to the president throughout the Corporation Codes, but that does not mean you have to give up your traditional name for the President as Chief, CEO or "Poobah". All through your contract with the State (bylaws) you will see references to the "President." When you state your officers in the bylaws, just write in, one time, that the President will also be referred to as the "Grand Poobah".

The Corporation Codes like to see a Board of Directors and will refer to the Board, or to Officer's, Director's, Treasurer's and Secretary's by those names. If you like to call a meeting of "The Board of Governors" that not a problem. All you need to do is add into your bylaws, even if just once, that the Board is the same as the Governors or the Board of Governors and the same for any other office or office holder's name. After all, this contract your making with the State will gather dust on shelf while you and all your members meet with the Board of Governors at the Grand Poobah's favorite steak house for a meeting.

Okay, so now our bylaws say we will have a President, also known as the Grand Poobah, and our Board of Directors are also known as the Board of Governors. 

 

Changing bylaws every year? Why?

The short answer is yes, but why?

One year I worked for a company that had hundreds of binders  called "Practice and Procedures." Every week or so a green piece of paper arrived, "the addendum", which said to take out the old page and add the new addendum page.

No matter what you did at this company, they had an approved method from painting the building to proper footwear. The procedures, methods and practices changed often and remained flexible as things changed or became obsolete. The bylaws almost never changed.

The contract with the State is one thing, and approved footwear is another. How you run your corporation and stay in compliance with Corporation Codes is one thing and your style of bow or shoes are another. The only thing you really need to do is figure out what options in the contract with the State you would like to exercise.

If you make a rule outside the bylaws that no compound bows are allowed, the State of California does not care. You may remove, throw out, deny, expel or exclude users of compound bows at your range, your club, state shoot, city shoot or any other shoot, legally and without one word about compound bows in your bylaws. Just list bows and exclude compound bows in your Operating Procedures and post it on the wall.

The state is not concerned with the shelf on your long bow, pin numbers and the like. Giving up those details in  your bylaws may make us fearful that without declaring these items to the State, the enforcement power will be lost. Your bylaws may state that your corporation is wholly and totally the authority for all rules and procedures as outlined in "The Practices Procedures Operating and Official Procedures of the XYZ Corporation." If this is not enough, the bylaws may include "The Corporation XX will organize the XX and YY Shoot as specified in the "Practice, Operating... Procedures of this corporation."

Okay, now we can change a really terrible terrible rule about feather lengths as needed without completely changing the bylaws. Oh, and yes, it is much cheaper to send out the new Operations Manual than to print the entire bylaw book.

 

Robert's Rules of Order Divides by 4 

Robert's wrote that there may be no Constitution but you may have a Charter. The Constitution, if you have one,  should only have the most important rules, the name, qualifications, officers, essential meetings and how to amend the constitution.

The bylaws have rules that are hard to change and require a quorum because of their importance. Unless specified they can't be suspended, but even then require a two-thirds vote.

The Rules of Order cover how the business is run and the duties of the officers. These are the everyday rules of running the business.

Standing rules are rules that may be changed by a majority vote at any business meeting by a majority vote. Should the people at the business meeting make unwanted decisions, a two-thirds vote or a majority vote could change their decision.


 Whose job is it anyway?

"Well I am the Poobah and I want my Cousin Whitley, the Keeper of the Secret Utterances, aka Secretary, to stop taking the minutes of every darn meeting." With some exceptions, like the Secretary is out with the flu, the State says the Secretary will take the minutes. The Grand Poobah can't make contrary decisions just because he is the elected leader.

There are some jobs that belong only to the President or only to the Secretary. We are giving our leader, Grand Poobah a list of jobs outlined in the California Corporation Codes and a list of things he should remember from the "Roberts Rules of Order."

Did I mention that our corporation decided to use the Roberts Rules? If you decide to adopt something like a book of rules or a book on etiquette, you must be prepared to abide by that document. 

Every week we hope to put add a something addressing your questions about bylaws. 

And yes, you may add Grandma's pie recipe to the bylaws.

 

Chapter 1 Article 1

Article 1 is "Title and Purposes" and states that you are forming a Nonprofit Mutual Benefit Corporation and "Subject to any other provision of law of this state applying to the particular class of corporation or line of activity, a corporation may be formed under this part for any lawful purpose; provided that a corporation all of the assets of which are irrevocably dedicated to charitable, religious, or public purposes and which as a matter of law or according to its articles or bylaws must, upon dissolution, distribute its assets to a person or persons carrying on a charitable, religious, or public purpose or purposes may not be formed under this part."

 

Secretary's Job

The Secretary is an Executive officer and assists in establishing the policy of the corporation and may hold more than one office. They may call for a meeting of the board and take the letter of resignation from a board member.

Some of the  State of California Codes referring to a Secretary:

7211. (a) Unless otherwise provided in the articles or in the bylaws, all of the following apply:

(1) Meetings of the board may be called by the chair of the board

or the president or any vice president or the secretary or any two directors.

7213. (a) A corporation shall have a chairman of the board or a president or both, a secretary, a chief financial officer and such other officers with such titles and duties as shall be stated in the bylaws or determined by the board and as may be necessary to enable it to sign instruments. The president, or if there is no president the chairman of the board, is the general manager and chief executive officer of the corporation, unless otherwise provided in the articles or bylaws. Any number of offices may be held by the same person unless the articles or bylaws provide otherwise.

 

7224 (c) Any director may resign effective upon giving written notice to the chairman of the board, the president, the secretary or the board of directors of the corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective.

7231.5 (c) "Executive officer" means the president, vice president, secretary, or treasurer of a corporation or other individual serving in like capacity who assists in establishing the policy of the corporation.


The Committee

The Grand Poobah knows little about picking out wallpaper and I think the Board of Governors are colorblind. Can we just start a committee and make decisions? No, but no one is stopping you from getting together unofficially or from asking the board to create an official "Wallpaper" Committee.

Code 7210 "....The board may delegate the management of the activities of the corporation to any person or persons, management company, or
committee however composed, provided that the activities and affairs
of the corporation shall be managed and all corporate powers shall be
exercised under the ultimate direction of the board."

Okay, let's say the board lets you form a committee for the purpose of picking wallpaper and making the foyer a nice color. Your committee makes recommendations and the board removes the committee. Perhaps you are not satisfied and think the committee should continue to explore more options. Can the board just dissolve the committee? Yes.

7212.  (a) The board may, by resolution adopted by a majority of the
number of directors then in office, provided that a quorum is
present, create one or more committees, each consisting of two or
more directors, to serve at the pleasure of the board.  Appointments
to such committees shall be by a majority vote of the directors then
in office, unless the articles or bylaws require a majority vote of
the number of directors authorized in the articles or bylaws.  

The most important words here are "pleasure of the board" and is basically the board sanctioning the formation of a committee or deciding to dissolve the committee. Committees may make decisions from the color scheme at the corporate picnic to having the authority of the board, with limitations, and to the extent provided in the resolution of the board or bylaws.

Because committees may be formed as needed by the board, they are a valuable part of the corporation. They have the flexibility of forming as the need for information, research or just the need for several people to join together to find a solution or take on a job.


The California Code HERE

NONPROFIT MUTUAL BENEFIT CORPORATIONS - Chapter and Article Table of Contents

CHAPTER 1.  ORGANIZATION AND BYLAWS
       Article 1.  Title and Purposes
       Article 2.  Formation
       Article 3.  Articles of Incorporation 
       Article 4.  Powers   
       Article 6.  Location and Inspection of Articles and Bylaws
CHAPTER 2.  DIRECTORS AND MANAGEMENT
       Article 1.  General Provisions
 

      Article 2.  Selection, Removal and Resignation of Directors   
       Article 3.  Standards of Conduct   
       Article 4.  Examination by Attorney General                             CHAPTER 3.  MEMBERS
       Article 1.  Issuance of Memberships          
       Article 2.  Transfer of Memberships
       Article 3.  Types of Memberships

      Article 4.  Termination of Memberships      
       Article 5.  Rights and Obligations of Members and Creditors
CHAPTER 4.  DISTRIBUTIONS
       Article 1.  Limitations
       Article 2.  Liability of Members    
CHAPTER 5.  MEETINGS AND VOTING
       Article 1.  General Provisions         
       Article 2.  Additional Provisions Relating to Election of
                   Directors              
CHAPTER 6.  VOTING OF MEMBERSHIPS       
CHAPTER 7.  MEMBERS' DERIVATIVE ACTIONS
CHAPTER 8.  AMENDMENT OF ARTICLES
CHAPTER 9.  SALES OF ASSETS
CHAPTER 10.  MERGERS
       Article 1.
Merger 

      Article 2.  Effect of Merger
CHAPTER 11.  BANKRUPTCY REORGANIZATIONS AND ARRANGEMENTS                                                                            

CHAPTER 12.  REQUIRED FILINGS BY CORPORATION OR ITS                         AGENT
CHAPTER 13.  RECORDS, REPORTS, AND RIGHTS OF INSPECTION
       Article 1.  General Provisions                                                           

      Article 2.  Required Records, Reports to Directors and  Members         
       Article 3.  Rights of Inspection
CHAPTER 14.  SERVICE OF PROCESS
CHAPTER 15.  INVOLUNTARY DISSOLUTION                              CHAPTER 16.  VOLUNTARY DISSOLUTION
CHAPTER 17.  GENERAL PROVISIONS RELATING TO DISSOLUTION CHAPTER 18.  CRIMES AND PENALTIES                                       CHAPTER 19.  FOREIGN CORPORATIONS  

 

 

 

 

 

 






The CA Corporation Codes here

Bylaws

What goes in and what stays out and is there room for Grandma's pie recipe?  Yes, you may add Grandma's pie recipe to the bylaws.

 

Who's Committee is it anyway and why can't I just form one? After all, I am a member and who knows more about wallpaper?


Table of Contents for Nonprofit Corporation California Codes are listed.

 

Do you have a bylaw question?

 

This is not legal advice. Want to know which corporation code this opinion came from? Send and email to:

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