The bylaws are an essential part of your articles of incorporation when protecting your corporation from litigation. A corporate lawyer can guide you through the process of creating your company's bylaws so that you can protect your directors from litigation. 

Corporate Bylaw Basics and Appointing Directors

An important factor with bylaws is the identifying information, which includes the company's name, location, and purpose. You must include the number of members of the board of directors and their responsibilities in the bylaws. It should consist of the committees of the board of directors. 

You should create specific rules and processes for removing members of the board of directors and appointing new members.

Shielding Directors from Liability

Directors and officers can sometimes face legal claims made against them based on the roles they serve while serving on a board. While a director can purchase liability insurance, drafting effective bylaws is the best way to protect directors and officers from litigation.

A corporate litigation attorney will explain state laws and whether a director will be shielded from liability. Even in states where a director is not held liable for damages caused by the company, they might be held responsible under cases of extreme misconduct or when acting in bad faith or breaking the law.

Protecting a Director Through Indemnification

Indemnification is an option your company can include in the bylaws to protect a director from specific claims. They will be shielded from legal costs and will not have to fund a settlement figure personally. Your director can only be indemnified if they acted in good faith, acted in the company's best interest, and had no reason to believe they were violating the law.

Updating Bylaws

Once you have put the bylaws in place, you must have a process for changing them. You must also detail the procedures you must follow when voting to change existing bylaws. 

When your board of directors is considering amending the bylaws, it's essential to consult with an attorney beforehand. This is because the laws constantly change, and the existing bylaws might not adequately shield your board of directors from liability.

Paying for an Attorney

Retaining legal counsel is also essential because a legal claim against a director can persist for years. Your attorney will help your company do everything possible to protect your directors. The advancement of legal expenses to pay for a corporate lawyer is also a common aspect of indemnification.

For more information, contact a corporate litigation attorney near you.