Bylaws must conform to Articles of Incorporation
In Nevada Classified Sch. Emp. Ass'n v. Quaglia the Nevada Supreme court held that a corporation’s bylaw is void to the extent that it is inconsistent with the corporation’s articles of incorporation; any amendment to the bylaws adopted using the procedures set forth in the invalid bylaw’s voting procedure is also invalid.
This issue was a matter of first impression here, but this has long been the rule elsewhere.
These issues arose in the context of the Nevada Classified School Employees Association (NCSEA). The Articles of Incorporation of the NCSEA require the voting power of all members to be equal, but a bylaw placed a cap on the number of delegates a chapter could have. The cap on the delegates resulted in the Washoe county chapter having a delegate to member ratio of 1 to 132, while other chapters had a ratio of 1 to 23. This disproportionate representation became critical when a resolution to require a supermajority of chapter member votes to allow the chapter to disassociate was approved despite the unanimous opposition of the Washoe County Chapter delegates. The Chapter voted to disassociate, but the approval was by simple, rather than super majority vote.
The NCSEA sought a preliminary injunction to prevent disassociation. The district court denied relief, noting that the supermajority requirement, adopted through the disproportionate representation, was “likely invalid.” The Supreme Court agreed, bringing Nevada’s corporate law up to date.
