The importance of company rules

Discretionary shares
May 3, 2021
Incorporation of professionals
May 13, 2021

The bylaws (or regulations for federal corporations) are a major document in the organisation of a corporation. The bylaws generally contain procedures for internal governance, such as the manner in which shareholder meetings and board meetings are held, and also contain any other provisions that corporate laws allow to be included.

In this article, we present three important provisions that are usually found in a company's rules.

1- Preponderant vote of the President

Corporate laws, both under the Quebec and federal systems, provide that, unless otherwise provided for in the by-laws, the president of the corporation presides over shareholders' meetings, and that in the event of a tie, the president of the meeting has the power to cast the deciding vote. This could be a real internal management problem, especially when a company is composed of two shareholders with equal voting rights. The rules therefore generally provide that the chairman of the company does not have a casting vote at a shareholders' meeting, even if there is an equality of votes on a given issue.

2- Board quorum

Quorum is the number ofdirectors who must be present at a board meeting in order to act and make decisions. Under Quebec law, quorum is the majority of directors in office. Under federal law, quorum is rather the majority of the fixed number of directors or the majority of the minimum number ofdirectors provided for in the articles.
In both cases, the quorum provided for in the law is subject to the provisions of the company's regulations. It is therefore important to have the quorum provided for in the bylaws verified before its adoption, especially when the board of directors will be composed of several persons.

3- Role of officers

The officers of a company, i.e. the president, vice-president, treasurer, secretary or any other equivalent function, are appointed by the board of directors. Unlike directors, officers manage the day-to-day business of the company.

The company's bylaws occasionally provide for a precise description of the role and tasks associated with each function of officer. Another approach is that the bylaws provide that the role description of officers is to be determined by the board of directors.


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