Bylaws are legally enforceable documents that instruct the corporation, shareholders, officers, and directors how the affairs of the business must be conducted. ... Without them, companies run the risk of being taken over by shareholders that may not have the same interests in mind when it comes to running the company.

What happens when bylaws are not followed?

Point out to them that bylaws are not a “suggestion,” they are mandatory. They form the foundation of how the entire organization functions. Failing to follow them puts the board, and the nonprofit, at legal risk. It may also put each director at individual risk, which D&O insurance will not cover.

What happens when bylaws are violated?

Criminal liability – in some cases, violations of corporate bylaws can also involve criminal charges, which can lead to the imposition of fines and/or jail time.