Also known as: bylaw · bye-law · byelaw · by-laws · bylaws · local regulation
Written by attorneys — see sources below.
An internal rule or set of rules adopted by a corporation or common-interest association to govern its procedures, operations, and governance structure. Such rules must remain consistent with the articles of incorporation or declaration and applicable statutes. They address matters including director elections, meeting requirements, and expense reimbursements.
Benson Motors adopted a bylaw requiring reimbursement of shareholder proxy solicitation costs in director elections. After a contested election, shareholder Bradley Banks incurred expenses soliciting proxies and sought repayment. The corporation refused payment because the record date had preceded the bylaw's adoption. Banks sued to enforce the bylaw.
Shareholders of Brighton Manufacturing proposed amending a bylaw on proxy procedures to restrict the board's ability to add conditions. The board resisted, asserting authority to modify procedures for orderly elections. The shareholders claimed their amendment power overrode board discretion. Litigation followed over the scope of permissible bylaw changes.
Black & White Taxicab adopted a bylaw governing exclusive depot privileges. Brown & Yellow Taxicab challenged the bylaw as exceeding corporate authority under state law. The court examined whether the bylaw conflicted with the company's charter powers. The dispute turned on the validity of the internal rule.
In September 1925 the shareholders of a Kentucky corporation organized a new corporation of the same name under the laws of Tennessee. The Kentucky corporation had been carrying on a transfer business at Bowling Green and held a contract with the Louisville and Nashville Railroad Company. The business and property of the Kentucky corporation were transferred to the Tennessee entity. The original Kentucky corporation was then dissolved. The Tennessee corporation entered into a new contract with the Louisville and Nashville Railroad Company. The contract granted the exclusive privilege of going upon railroad trains and depot premises to solicit baggage and passenger transportation. It also assigned a plot of ground for the use of its taxicabs while awaiting trains. The contract required the respondent to render specified service and to make monthly payments to the railroad. Its term was one year and continued for successive yearly periods until terminated by either party on thirty days' notice. Shortly after the contract was executed the Brown and Yellow Taxicab and Transfer Company filed suit in the United States District Court for the Western District of Kentucky. The suit named the Black and White Taxicab and Transfer Company and the railroad company as defendants. The complaint alleged that the railroad had permitted others to enter its property to solicit transportation and to park vehicles. It further alleged that the petitioner had done so in the places assigned to the respondent and on an adjoining street so as to obstruct the respondent's operations. The petitioner's answer asserted that the respondent had been incorporated in Tennessee for the fraudulent purpose of creating diversity jurisdiction and evading Kentucky law. It also asserted that the contract was contrary to Kentucky public policy, in excess of the railroad's charter powers, and violative of section 214 of the Kentucky constitution. The record shows that the incorporators and railroad representatives arranged the Tennessee incorporation specifically so that the controversy could be determined in federal court. The district court found there was no fraud upon its jurisdiction, held the contract valid, and entered a decree enjoining the petitioner from further interference. The railroad company declined to join the appeal. The Circuit Court of Appeals affirmed the decree. This Court granted a writ of certiorari.
View caseA homeowners association enacted a bylaw restricting lot development to preserve coastal areas. Lucas purchased property before the bylaw and claimed it deprived him of all economic use. The association defended the bylaw as a valid exercise of governing authority. The case addressed whether the restriction constituted a taking under the governing documents.
In 1986, petitioner David H. Lucas purchased two residential lots on the Isle of Palms in Charleston County, South Carolina, for $975,000. He intended to construct single-family homes on the parcels, which at the time were zoned for such use and required no building permit for development. No portion of the lots qualified as a critical area under then-existing coastal zone legislation. Subsequently, in 1988, the South Carolina Legislature enacted the Beachfront Management Act. The legislation established a baseline and prohibited construction of occupable improvements seaward of a line drawn 20 feet landward of that baseline, directly affecting Lucas's parcels by barring any permanent habitable structures. Lucas filed an action in the Court of Common Pleas alleging that the Act's restrictions effected a taking of his property without just compensation. Following a bench trial, the court determined that the prohibition rendered the lots valueless and ordered the state to pay just compensation in the amount of $1,232,387.50. The Supreme Court of South Carolina reversed the trial court's judgment. It accepted the legislature's findings that new construction threatened public resources and concluded that a regulation designed to prevent serious public harm could not constitute a taking. The United States Supreme Court granted certiorari to review the South Carolina Supreme Court's decision.
View caseA school board corporation adopted a bylaw authorizing a moment of silence for meditation or voluntary prayer. Jaffree challenged the bylaw as an establishment of religion. The board argued the bylaw merely permitted individual choice. The litigation tested the bylaw's constitutionality under the First Amendment.
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View caseA laundry business corporation enacted a bylaw regulating operations that disproportionately affected Chinese-owned businesses. Yick Wo operated a laundry denied a permit under the bylaw. He challenged the bylaw as violating equal protection. The case examined whether the internal regulatory rule was applied discriminatorily.
Yick Wo and Wo Lee were Chinese subjects operating laundries in San Francisco. Both petitioners complied with every requisite deemed necessary by law or public officers for the protection of neighboring property from fire and against injury to the public health. The ordinances of the supervisors of the county and city of San Francisco conferred upon the supervisors a naked and arbitrary power to grant or withhold consent without reference to the personal character or qualifications of applicants or the adaptation of the buildings. They did not point to a regulation of the business of keeping and conducting laundries with a view to protection against fire. Applications for consent submitted by Yick Wo, Wo Lee, and more than two hundred other Chinese subjects were denied by the supervisors. At the same time, eighty individuals who were not Chinese subjects received permission to carry on the same business under similar conditions. Yick Wo was convicted and imprisoned for violating the ordinances. His case was brought to the Supreme Court of the United States by writ of error from the Supreme Court of California. Wo Lee's parallel case advanced through the Circuit Court of the United States for the District of California. The matters reached the Supreme Court of the United States for review of federal questions arising under the Constitution and treaties.
View caseThe incorporators or the board of directors must adopt the initial bylaws. Investors or shareholders acting without authority cannot validly adopt them before the board is constituted.
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A bylaw requiring reimbursement of shareholder proxy expenses applies only to elections for which the record date follows its adoption. It cannot retroactively govern prior elections.
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Shareholders may not limit the board's authority to amend or repeal conditions or procedures in bylaws concerning proxy solicitations when doing so would prevent a reasonable and orderly process.
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Bylaws must not conflict with the articles. Provisions raising vote thresholds or narrowing director eligibility beyond what the articles allow are unenforceable.
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…controlling distinction in the past. "Nor can it make any difference that the right is purchased previous to the passage of the by-law," for "[e]very right, from an absolute ownership in property, down to a mere easement, is purchased and holden subject to the restriction, that it shall be so exercised as not to injure…