Bylaws
The internal operating rules of a corporation, covering governance procedures and shareholder rights.
Definition
Bylaws are a company's internal rules governing how it operates, including board meeting procedures, officer responsibilities, shareholder voting requirements, and stock issuance rules. They are adopted at incorporation and can be amended by the board or shareholders. Bylaws work alongside the certificate of incorporation to form the company's governance framework.
Why it matters
Bylaws determine how corporate decisions are made, including those that affect your equity. For example, bylaws specify the process for approving new option pool shares, authorizing share transfers, and conducting shareholder votes on acquisitions.
Example
A company's bylaws specify that a majority board vote is required to approve any acquisition over $10M, and that shareholders must approve any transaction exceeding 50% of the company's assets. These procedures protect employee interests in major decisions.