At the time of forming a company, one of the fundamental elements to consider is the corporate bylaws.
Generally, notaries public – before whom the civil or mercantile societies are constituted – offer advice for the drafting of the bylaws; However, it is essential that the members read them, understand their scope and effects, as they are a contract between the partners and society.
Now, why are statutes important and should not be taken lightly? The bylaws are the Company Contract: the instrument that brings the legal entity to the legal entity. It is the written agreement between its shareholders that contains the rules they have drawn up to regulate both their relations and those they will have with the company.
Being the constituent pact entered into between the shareholders themselves, it is obligatory both for those who constitute the company at that time and for anyone who joins in the future.
When you start and create a business, it is common not to anticipate problems or difficult times for the company or its partners; However, if you make clear, reasonable and transparent rules, you can prevent future problems with your partners from affecting the relationship between you and – eventually – the business.
The constitutive deed that you will sign with your partners when setting up your company, must include, in addition to the minimum requirements required by law and that I mention below, the form of organization and operation of your company, giving rise to all this to your bylaws.
a) The names, nationality and address of the individuals that constitute the company;
b) The object of the company;
c) Your company name or denomination;
d) Its duration;
e) The amount of the share capital and the address of the company;
f) The manner in which the company is to be administered and the faculties and appointments of the administrators;
g) The way to make the distribution of profits and losses among the members of society;
h) The amount of the reserve fund; Y,
i) The cases in which the company has to dissolve early and the bases to practice the liquidation of the company.
Once your company is established, the notary public must issue and register the articles of incorporation in various registries, such as the Public Registry of Commerce and the Ministry of Finance and Public Credit, so that the commercial company contract has effects before third parties. say, so that any third party recognizes and respects the existence of your company and with this you can initiate the pertinent steps before the Tax Administration Service, banks and authorities in general.
What should you consider when drafting your bylaws?
- The object of society: What is your company going to do? What activities are you going to do? A company can not dedicate itself to everything, so it is not advisable to establish a social object that is too broad, since it can hinder the positioning and identity of your company in the market.
It is important to define it adequately, since all the activities carried out by your company must have the purpose of achieving the corporate purpose. Usually the corporate purpose includes, in addition to the main activities of your company, some accessory or that could be carried out in the future, as long as they are related to the main activities.
- Administration of the company: Will your company have a sole administrator, a general manager or a board of directors? Will the partners participate in the board of directors or will independent directors be appointed?
It is increasingly common for companies to integrate independent management into their administration, achieving an objective consensus in decision making, avoiding conflicts of interest and giving greater confidence to their consumers and, in the case of public companies, to their investors.
It is important to consider that independent talented people can bring their experience and a different vision to yours and that of your partners for the good of your business.
- Legal representatives: Who will have the power to act on behalf of the company before authorities and / or third parties? Who will have the power to enter into contracts on behalf of my company?
The representation of any mercantile company corresponds to its administrators, who are in charge of carrying out the operations inherent to the object of the company. In addition, it is possible to grant general or special powers to any person, as broad or limited as your business requires.
- Fractures within society: No company is perfect nor its partners always coincide. In addition, it is logical that there are disagreements among its members. Therefore, the law contemplates the possibility of establishing mechanisms to be followed in case shareholders do not reach agreements on specific matters; It is also advisable to clearly and transparently establish exclusion or separation of partners procedures.
- Changes (sometimes painful, sometimes good, all inevitable): It is difficult to anticipate changes, disagreements or critical situations over which we have no control (illnesses, the death of a partner, opportunities or market attacks, etc.), This is very important to establish how to proceed and under what procedures should be acted in these cases.
The bylaws are a contract, therefore the law, in addition to the minimum requirements that must contain, allows to establish agreements, rights, obligations and conditions for the operation of society and to regulate relations between partners and between them and society , as long as they are not violating the law, such as, for example:
- Non-competition agreements.
- Limitations on the transfer of shares.
- Rights of separation.
- Exclusion of partners.
- Options for buying or selling the shares.
- Agreements for the exercise of the right to vote in shareholders’ meetings.
It is also advisable to draft flexible and practical bylaws for the business that you intend to carry out. Associating ourselves with strangers can lead to an excess that the rules agreed upon are very rigid and impractical, such as excessive corporate authorizations, very high qualified majorities to adopt agreements that could cause delays in decision making. Instead of being helpful, they are obstacles to the running of the business.
By entering into a clear, reasonable, flexible and practical partnership contract with your partners, your business will run smoothly, and you and your partners will be able to devote full time to your company.