Four basic bodies of rules govern the procedures and actions of your corporation. The applicable Corporation Act of the state of incorporation provides statutory authority for the existence of the corporation, as well as guidelines for its administration. The Corporation Act provides for the rights of shareholders, and the authority of directors and officers, as well as other matters. Those statutes follow a familiar pattern across most states but there are variations in detail, thereby requiring the advice of local counsel in such matters. Your articles of incorporation and by-laws provide a second and third body of rules. These documents operate within the framework of the corporate statute but may provide, for example, greater rights for shareholders or more limited powers for officers. Finally, the contracts of the corporation may establish obligations in connection with corporate actions. Examples include bank loan documents requiring advisements or supra-majorities for Board actions changing the financial position of the corporation. A second example is stockholder buy-sell arrangements which provides special shareholder privileges or restrictions governing corporate financial decisions.
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