The Consequences of Violating Corporate Bylaws

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Members face fines and suspension of their rights if they violate bylaws.
Members face fines and suspension of their rights if they violate bylaws. (Image: Jupiterimages/Photos.com/Getty Images)

When a business becomes a corporation, board members form corporate bylaws that outline the corporation's operations and policies. This written document provides a guideline on what the corporation is allowed or not allowed to do. If the corporation's board of trustees or any of its members violate the corporate bylaws, the violator or violators can face strict penalties.

Member Information

People who want to become members of a corporation must provide information regarding their eligibility. Corporate bylaws dictate that the board of trustees should evaluate this information before a vote is taken for the member to join. If the applicant gives false personal information, she is violating corporate bylaws. Penalties the applicant might face include a lifetime ban from corporate membership.

Annual Dues Collection

Members must pay annual dues at a set amount written in the corporate bylaws. These annual dues can go toward seminars and conferences held by the board of trustees and members. If a member does not pay her annual fees, she could face penalties, such as being charged the total amount due and having all her rights as a corporate member taken away.

Abuse of Powers

If any member abuses her powers to intimidate or use corporate information for personal profit, the member could face penalties, including legal ones. Some bylaws state that the member could face misdemeanor or other criminal charges that could lead to jail time.

Fiduciary Violations

Before a shareholder member can engage in stock sales and transfers, she must first check the corporate bylaws. Depending on the written statutes, the shareholder may be limited as to who can purchase her shares and at what price she can make the transfer. The shareholder member may face fines and legal problems for breaching her fiduciary duties.

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