What is Corporate Charter?

Understanding the Role of a Corporate Charter

A corporate charter is a legal document issued by a government’s regulatory body that grants a corporation certain legal rights and responsibilities. The document exists to define the corporate structure and purpose of a company, as well as the rules and roles of the people involved. It also serves as a public declaration of the company’s intentions and roles.

The corporate charter is a contract between the business and the government that sets out the broad parameters of the company’s operations and activities. It is the legal foundation for the business and must be adhered to at all times. The corporate charter is different from the bylaws, which lay out the internal policies and regulations for running and managing day-to-day operations.

Key Components of a Corporate Charter

A corporate charter fundamentally consists of the following components:

• Name of Corporation: The name of the corporation must appear in the corporate charter.
• Purpose: The charter outlines the particular purpose for which the corporation was established.
• Corporate Structure: This outlines the organizational structure of the corporation and how it functions.
• Rights/Powers: The charter outlines the legal rights and powers of the corporation.
• Shares: The charter identifies the number of stocks/shares issued and the related rights.
• Directors: The charter outlines the duties, powers, and length of the directors’ terms.
• Officers: The charter outlines the officers’ roles and titles.

How to Amend a Corporate Charter

A corporate charter may be amended in various ways depending on the applicable laws of the jurisdiction. Generally, an amendment is initiated by one of the actions:

• A board resolution adopted by the directors;
• A shareholders consent;
• A filing with the governing body.

The process of amending a corporate charter generally requires the approval of the shareholders to adopt the amendment and may or may not require the approval of the governing body as well, depending on the jurisdiction.