Corporate Governance in New York & New Jersey: How Bylaws and Operating Agreements Interact With State Law
Every business—whether a corporation, LLC, or nonprofit—relies on a combination of internal governance documents and state statutes to define how authority is exercised and how decisions are made. While owners and directors often focus on their bylaws or operating agreement, these documents never operate alone. In New York and New Jersey, state law fills gaps, supplies default rules, and sometimes overrides provisions that conflict with mandatory statutory requirements.
Understanding how these layers fit together is essential for preventing disputes and ensuring that your entity functions as intended.
1. Two Layers of Governance
Every entity operates under a dual framework:
A. Internal Governance Documents
Corporations: Certificate of Incorporation + Bylaws
LLCs: Articles of Organization + Operating Agreement
Nonprofits: Certificate of Incorporation + Bylaws
Optional: Shareholder agreements, member agreements, buy–sell provisions
These documents express the owners’ or board’s intended governance structure.
B. State Statutory Law
New York: Business Corporation Law (BCL), LLC Law, Not-for-Profit Corporation Law (NPCL)
New Jersey: Business Corporation Act (NJBCA), Revised Uniform LLC Act (NJ-RULLCA), New Jersey Nonprofit Corporation Act (Title 15A)
Statutes serve two key functions:
Default rules — filling gaps when documents are silent, and
Mandatory rules — limits that cannot be altered by bylaws or private agreement.
2. Corporations: Bylaws vs. State Law
A. New York Corporations (BCL)
New York’s BCL permits broad private ordering through bylaws, so long as they are not inconsistent with the BCL or the Certificate of Incorporation. When bylaws leave an issue unaddressed, statutory defaults govern.
Typical default areas include:
Director elections and removals
Quorum and voting requirements
Notice procedures
Filling board vacancies
Some rules are mandatory. For example:
Shareholder inspection rights
Appraisal rights in certain mergers
Minimum quorum requirements
Fiduciary obligations of directors
B. New Jersey Corporations (NJBCA)
New Jersey follows the same hierarchy:
Statute
Certificate of Incorporation
Bylaws
Bylaws are flexible but cannot override:
Shareholder voting rights on fundamental actions
Inspection and appraisal rights
Director fiduciary duties (loyalty, care, good faith)
Statutory notice and quorum minimums
Key Principle for Corporations
If bylaws conflict with the statute or the Certificate, they are unenforceable. Where bylaws are silent, the statute governs by default.
3. Nonprofits: Governance Under NPCL and Title 15A
Special Considerations for Nonprofit Entities (NY & NJ)
Nonprofit corporations also operate under the charter + bylaws + statute framework, but the statutory overlay is often more extensive due to public-interest and charitable-oversight concerns.
In New York, the Not-for-Profit Corporation Law (NPCL) establishes mandatory rules regarding:
Board powers and fiduciary duties
Quorum minimums (generally not less than one-third of the entire board)
Related-party transaction procedures (NPCL § 715)
Financial oversight requirements (NPCL § 712-a)
Attorney General supervisory authority over charitable assets
Bylaws may address procedural matters such as meeting practices, elections, and committee structures, but they cannot conflict with NPCL requirements. Any omission is filled by statutory default rules.
In New Jersey, the New Jersey Nonprofit Corporation Act (Title 15A) provides similar guardrails. Mandatory provisions include:
Minimum quorum requirements for boards and members
Fiduciary obligations of directors and officers
Notice and voting rights for members (if applicable)
Attorney General authority regarding charitable assets
The rule that any bylaw “inconsistent with law or the certificate of incorporation” is void
For nonprofits in both states, the practical takeaway is clear: bylaws must be drafted in harmony with statutory requirements, and reliance on outdated or generic forms often results in unintended governance outcomes.
4. LLCs: Operating Agreements and Statutory Defaults
LLCs offer greater contractual flexibility than corporations, but only if the operating agreement is complete and well-drafted.
A. New York LLCs (NY LLC Law)
Operating agreements may govern almost any aspect of internal affairs. However, where the agreement is silent, NY LLC Law supplies rules on:
Management authority
Voting requirements
Profit and loss allocations
Member withdrawal and admission
Baseline fiduciary duties
Some obligations—particularly those involving bad faith, intentional misconduct, or public policy—cannot be waived.
B. New Jersey LLCs (NJ-RULLCA)
NJ-RULLCA is expressly designed as a default governance regime. It governs whenever an operating agreement is missing or incomplete, and includes:
Default management (member-managed unless otherwise provided)
Voting and approval rules
Fiduciary duties
Buyout and dissociation rights
While NJ-RULLCA emphasizes contractual freedom, it also contains specific non-waivable provisions, meaning some duties and rights cannot be eliminated even by unanimous consent.
Key Principle for LLCs
A carefully drafted operating agreement prevents unintended application of statutory defaults. Without one, the statute effectively becomes the company’s operating agreement.
5. How Conflicts and Gaps Are Resolved
Across NY and NJ, and across all entity types, three principles consistently apply:
1. Silence → Statutory Default Rules Apply
If governance documents do not address an issue, the statute fills the gap.
2. Conflict With Statute → Statute Prevails
Mandatory statutory provisions override any bylaw, operating agreement, or private contract.
3. Conflict With Charter → Charter Prevails
For corporations and nonprofits, the Certificate of Incorporation supersedes inconsistent bylaws.
For LLCs, the Articles of Organization hold priority, though they typically contain fewer governance terms.
6. Why This Matters for New York & New Jersey Entities
A. Avoiding Unintended Governance
Relying on outdated or template documents often means statutory defaults—not the entity’s leaders—control critical decisions.
B. Reducing Risk and Disputes
Clear, comprehensive governance documents:
Reduce the chance of deadlock
Clarify authority among directors, officers, and members
Prevent misunderstandings and litigation
Ensure compliance with statutory requirements
C. Supporting Growth and Stability
Effective governance documents create predictable decision-making structures as the entity expands or leadership changes.
7. How Good Pine P.C. Can Help
Good Pine P.C. advises businesses and nonprofits across New York and New Jersey on:
Drafting and revising bylaws and operating agreements
Ensuring governance documents align with BCL, NPCL, NJBCA, NJ-RULLCA, and Title 15A
Advising on fiduciary duties, voting structures, member and shareholder rights, and internal controls
Designing governance frameworks that reduce risk and reflect the organization’s operational realities
If you would like to review your entity’s governance documents or create updated materials tailored to your organization, we are ready to assist.
Legal Disclaimer
This article is provided for general informational purposes only and does not constitute legal advice. Reading this article does not create an attorney–client relationship with Good Pine P.C. You should consult qualified legal counsel regarding your specific situation before acting upon any information contained herein.
