Bylaws

Subject: Law 12 – Law on Partnership, Corporation, and Cooperative
1. Define by-laws.
 By-laws serve as a corporation's internal rulebook; they are a detailed set of rules and
regulations adopted to govern its internal operations and the rights and duties of
corporate officers, directors, or trustees, as well as stockholders or members. These
rules specify how these people will manage corporate affairs, oversee business
transactions, and interact with each other within the corporation.
2. Discuss the necessity of adopting by-laws.

 The by-laws are important for practical and legal reasons. While a corporation legally
exists after receiving its incorporation certificate, it is not yet ready to operate. It requires
set of internal rules, the by-laws, to direct its actions.
By-laws act as an extension of the articles of incorporation. Adopting it helps the

corporation establish clear internal rules. Furthermore, it is an important source of
authority for corporate officers and agents of the corporation. This prevents conflicts over
decision-making authority and ensures a well-organized management structure.
3. What is the procedure for the adoption of by-laws.

 The following must be followed for the adoption of by-laws:
1) By-laws require affirmative votes from stockholders representing a majority of
outstanding capital stock or from a majority of members for nonstock
corporations.
2) Signed by-laws are kept at the corporation's principal office for inspection by
stockholders or members during office hours.
3) A certified copy of adopted by-laws, signed by directors/trustees and
countersigned by the secretary, is filed with the Commission.
4) By-laws may be adopted and filed prior to incorporation, signed by all
incorporators, and submitted with the articles of incorporation.
5) By-laws become effective upon the Commission's certification of compliance with
applicable laws.
6) Certain corporations, such as banks, insurance companies, require a certificate
from the appropriate government agency confirming by-law compliance before
filing.
4. What are the elements of a valid by-laws?

 The following are considered as the elements of a valid by-laws:
1) They must not be contrary to existing law and inconsistent with the Code;
2) They must not be contrary to morals and public policy;
3) They must not impair obligations of contract;
4) They must be general and uniform in their operation and not directed against
particular individuals;
5) They must be consistent with the charter or articles of incorporation; and
6) They must be reasonable.
5. Discuss the binding effect of by-laws.

1) As to the corporation and its officers – By-laws, as the self-imposed private laws of a
corporation, have, when valid, substantially the same force and effect as the laws of the
corporation as have the provisions of its charter insofar as the corporation and the
persons within it are concerned. They are in effect written into the charter, and in this
sense, they become a part of the fundamental law of the corporation.
2) The corporation and its directors, trustees, and officers are bound by and must comply
with them unless and until they are changed, amended, or repealed in accordance with
Sec. 47. But subordinate employees without actual knowledge of the bylaws are not
bound.
3) As to stockholders or members – As a general rule, the stockholders or members of

the corporation are presumed to know the provisions of the corporation’s by-laws.
4) As to third persons – The weight of authority is that they are not bound by the by-laws
of a corporation since the by-laws operate merely as internal rules among the
stockholders. The exception is when the third person has knowledge of its provision,
either actually or constructively, at the time the transaction in question was entered into.
6. What are the contents of by-laws?

 The following can be found in the by-laws.
a) The time, place and manner of calling and conducting regular or special meetings of
the directors or trustees;
b) The time and manner of calling and conducting regular or special meetings and
mode of notifying the stockholders or members thereof;
c) The required quorum in meetings of stockholders or members and the manner of
voting therein;
d) The modes by which a stockholder, member, director, or trustee may attend
meetings and cast their votes;
e) The form for proxies of stockholders and members and the manner of voting them;
f) The directors’ or trustees’ qualifications, duties and responsibilities, the guidelines for
setting the compensation of directors or trustees and officers, and the maximum
number of other board representations that an independent director or trustee may
have which shall, in no case, be more than the number prescribed by the
Commission;
g) The time for holding the annual election of directors or trustees and the mode or
manner of giving notice thereof;
h) The manner of election or appointment and the term of office of all officers other than
directors or trustees;
i) The penalties for violation of the bylaws;
j) In the case of stock corporations, the manner of issuing stock certificates; and
k) Such other matters as may be necessary for the proper or convenient transaction of
its corporate affairs for the promotion of good governance and anti-graft and
corruption measures.
7. How do you amend by-laws?

 To amend by-laws:
1) The required votes should be met; when met:
a) Approved by a majority of the Board of Directors/Board of Trustees; and
b) Approved by a majority of the outstanding capital stock in the case of stock
corporations, or a majority of the members in the case of nonstock corporations.
2) File with the SEC for approval.
3) The SEC issues a Certificate of Approval.
4) Once approved (as evidenced by the certification from the SEC), the amended by-
laws become the new by-laws of the corporation
8. Distinguish articles of incorporation from by-laws.

 Articles of incorporation are a corporation's birth certificate, establishing its core
existence and purpose. By-laws, on the other hand, act as internal rules, defining how
the corporation operates and manages itself on a daily basis.
 Specifically:
1) The articles of incorporation constitute the charter or fundamental law of the
corporation, while the by-laws are merely rules and regulations adopted by the
corporation.
2) The former is executed before incorporation by the incorporators, while the latter is
usually executed after incorporation by the stockholders or members.
3) The filing of the former is a condition precedent to corporate existence, while the
filing of the latter is a condition subsequent.

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Subject: Law 12 – Law on Partnership, Corporation, and Cooperative

2. Discuss the necessity of adopting by-laws.

By-laws act as an extension of the articles of incorporation. Adopting it helps the

3. What is the procedure for the adoption of by-laws.

4. What are the elements of a valid by-laws?

5. Discuss the binding effect of by-laws.

3) As to stockholders or members – As a general rule, the stockholders or members of

6. What are the contents of by-laws?

7. How do you amend by-laws?

8. Distinguish articles of incorporation from by-laws.

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