Common Mistakes in Corporate Bylaws and How to Avoid Them
Corporate bylaws form the foundation of how your Alberta corporation operates. They set the rules for governance, decision-making, and dispute resolution—essentially serving as your company’s playbook. Yet, many businesses make critical mistakes in Corporate bylaws when creating or updating them.
From vague voting procedures to missing indemnity clauses, these errors can lead to legal uncertainty or conflict down the road. Understanding the common mistakes in corporate bylaws helps Alberta business owners prevent costly oversights and maintain smooth corporate operations.
What Are Corporate Bylaws?
Corporate bylaws are internal documents that outline how a corporation is governed. They define the roles of directors and officers, outline the procedures for holding meetings, describe the process for counting votes, and establish the criteria for making major decisions.
While bylaws aren’t filed with Alberta’s Corporate Registry, they are legally binding within the corporation and must comply with Alberta’s Business Corporations Act. Well-drafted bylaws ensure consistency, transparency, and accountability—especially as your business grows.
Common Mistakes in Corporate Bylaws
Even well-intentioned business owners can make errors when drafting or maintaining their corporate bylaws. These documents are complex and must balance legal compliance with practical governance. In Alberta, even minor oversights—such as using outdated templates or omitting key clauses—can have lasting consequences. Below are some of the most common mistakes businesses make with their bylaws and how to prevent them.
1. Using Generic Templates or Outdated Bylaws
Many Alberta corporations start with a generic bylaw template, thinking it will cover everything. Unfortunately, these “one-size-fits-all” documents often fail to reflect the corporation’s structure, share classes, or decision-making processes. Worse, they may reference outdated provisions that no longer comply with Alberta’s Business Corporations Act.
How to avoid this mistake:
Start with a lawyer-drafted template tailored to your business type and structure. Review your bylaws periodically—especially after legislative updates or major business changes—to ensure they still align with your corporate goals. A legal professional can help you identify inconsistencies or missing clauses that a template may overlook.
2. Leaving Out Key Clauses
Missing or unclear clauses are one of the most common errors found in Alberta corporate bylaws. These gaps can lead to confusion over voting procedures, decision-making authority, or how meetings should be conducted. For example, failing to include provisions for electronic or hybrid meetings can make it difficult to hold valid votes in today’s digital environment.
How to avoid this mistake:
Review your bylaws with a focus on completeness. Make sure they include clear rules about:
- How and when meetings are held (including virtual options)
- Quorum and voting thresholds
- Conflict of interest policies
- Appointment, removal, and indemnification of directors and officers
3. Conflicts Between Bylaws and Shareholder Agreements
Your bylaws govern how your corporation operates, while a shareholders’ agreement outlines the rights and obligations of shareholders. When these documents conflict—for example, when one allows a certain voting threshold and the other doesn’t—it can create confusion, internal disputes, and even legal challenges.
How to avoid this mistake:
Review all corporate governance documents together. Your bylaws, shareholders’ agreement, and unanimous shareholders agreement should complement each other, not compete. When one document is updated, the others should be reviewed at the same time to ensure consistency across the board.
4. Failing to Update Bylaws as the Business Evolves
Corporate bylaws aren’t static—they should grow with your business. Yet many Alberta corporations never revisit their bylaws after incorporation. As new directors join, shareholders change, or laws evolve, outdated bylaws can become a liability. For example, they may not account for new voting structures, share classes, or technological changes like digital signatures.
How to avoid this mistake:
Set a recurring schedule to review your bylaws—ideally every 2–5 years or after major structural changes. Updating corporate bylaws ensures your bylaws remain relevant, compliant, and effective.
5. Not Getting Legal Advice
Many business owners assume that because bylaws are “internal documents,” they can handle them without professional guidance. However, improperly drafted bylaws can lead to non-compliance, shareholder disputes, or invalid corporate actions—issues that are often far more expensive to fix later.
How to avoid this mistake:
Engage a lawyer who understands corporate governance and Alberta law. A lawyer can help:
Working with a corporate lawyer gives your corporation the peace of mind that its bylaws are legally sound and designed to support long-term success.
FAQs
Are Corporate bylaws legally required in Alberta?
While bylaws aren’t filed with the government, they are a critical internal requirement under the Business Corporations Act to guide how a corporation is governed.
How often should bylaws be reviewed?
Most Alberta corporations review their bylaws every two to five years—or immediately after major business or legislative changes.
Can I write my own Corporate bylaws?
Yes, but DIY bylaws often miss key legal provisions or conflict with Alberta law. It’s best to work with a lawyer to ensure they’re compliant and customized.
Conclusion
Avoiding mistakes in corporate bylaws is essential to keeping your Alberta corporation running smoothly and legally sound. From outdated clauses to conflicting governance documents, small oversights can have major consequences.
Regularly reviewing, updating, and aligning your bylaws with professional guidance protects your business’s stability and ensures your governance structure evolves with your corporation.
If it’s been a while since your bylaws were reviewed, now is the perfect time to ensure they still serve your company’s needs—and comply with Alberta’s corporate law.