Name a professional sports team, any sports team. From football to basketball to hockey, they all have one thing in common when they step onto the field, court, or rink; they have a game plan. The key to achieving goals is having a plan, whether for a professional sports team or a company. For companies, the plan starts at a far more fundamental level, before the growth strategy and marketing goals are laid out; it starts with the bye-laws. The bye-laws set out the rights, powers and obligations of the directors, officers and shareholders of a company. It is this initial framework upon which the rest of the company is built.
Companies registered in Bermuda, whether local or exempt, all have one thing in common; their main governance documents are their memorandum of association and bye-laws. The Bermuda Companies Act 1981 (Companies Act) is the primary piece of legislation in Bermuda with respect to matters affecting a company's incorporation, and it is the main legislation that affects governance of a company. Section 13 of the Companies Act provides that the administration of every company, meaning both local and exempt, shall be regulated by their bye-laws. Furthermore, the Companies Act provides that a company limited by shares, or other company having share capital, shall in its bye-laws make provisions for: (i) the transfer of share, registration of estate representative of deceased shareholder; (ii) keeping of the company's accounts and making available the financial statements to the members; (iii) an audit of the accounts of the company once at least in every year by an independent representative of the shareholders; (iv) the duties of the secretary to the company; and (v) the number of members required to constitute a quorum at any general meeting of the members of the company. The requirement to hold an annual general meeting and annual audit may be waived if the company has elected to dispense with holding the annual general meeting at a previous meeting, and the company has waived the requirement to have an audit at a general meeting, in accordance with section 88 of the Companies Act.
The bye-laws of a company can either be standard or bespoke. In addition to the mandatory contents of a company's bye-laws required by the Companies Act, standard or "vanilla" bye-laws generally also include:
issuance of shares, rights attaching to shares, the company's ability to purchase its share, share transfers, share certificates, and the way in...