Amendment of Bylaws Clause

The Amendment of Bylaws Clause in commercial contracts empowers parties to modify or update the bylaws governing their contractual relationship. Bylaws typically outline the internal rules and procedures for an organization, and this clause allows for their adaptation to changing circumstances without requiring an entirely new contract. 

Found in corporate charters or bylaws, it specifies how the bylaws can be changed – e.g., “by majority vote of the Board” or “by shareholders holding 2/3 of outstanding shares.” Unique aspects: it might reserve amendment power to certain parties (board vs shareholders) or require different thresholds for different provisions. Drafting must align with statutory requirements (for instance, state corporate law may mandate shareholder approval for certain bylaw amendments). This clause can also forbid amendments of certain sections (sometimes bylaws protect specific rights as “lock-in” that cannot be amended easily).

Key elements of an amendment of bylaws clause in a commercial contract include:

• Modification Authority: The clause specifies the parties' authority to amend bylaws, detailing the process and conditions under which modifications can occur.
• Notice Requirements: It may include provisions outlining the need for formal notice to all concerned parties before any amendments take effect.
• Consent Mechanism: The clause may stipulate the level of consent required for amendments, whether it be unanimous consent, majority approval, or another agreed-upon mechanism. 

Key drafting notes for amendment of bylaws clause

• When parties enter into joint ventures, an Amendment of Bylaws Clause provides the flexibility to adjust governance structures, profit-sharing mechanisms, or decision-making processes as the venture evolves.
• In corporate settings, this clause allows shareholders to adapt bylaws regarding voting rights, dividend distribution, or other internal procedures without the need for extensive legal processes.
• Organizations operating under nonprofit structures can use this clause to modify bylaws governing board composition, committee structures, or fundraising procedures.
• Franchisors and franchisees may include this clause to adapt operational guidelines, branding standards, or royalty structures as business conditions change.

The Amendment of Bylaws Clause is a strategic inclusion in commercial contracts, offering a streamlined way for parties to adapt to evolving circumstances. This clause emphasizes a commitment to maintaining a dynamic and collaborative contractual relationship by allowing for adjustments without the need for extensive legal formalities. In an ever-changing business landscape, the Amendment of Bylaws Clause stands as a testament to the parties' foresight, ensuring that their contractual framework remains adaptive and aligned with their collective interests over time.

Jurisdiction specific notes:

• U.S.: Typically dictated by the state corporate statute (e.g., Delaware General Corporation Law) – usually directors can amend bylaws unless articles reserve power to shareholders, but shareholders often have a concurrent power. A clause must not conflict with the statute or the certificate of incorporation.
• ‍U.K.: For companies, amending the Articles of Association (analogous to bylaws) requires special resolution (75% vote). Articles often contain entrenched provisions that require higher thresholds.
• ‍Other jurisdictions: Some nonprofit or union bylaws require government or court approval to amend certain clauses (especially if tied to regulatory conditions). Ensure the clause is compliant with any such external requirements.