All legal entities act on the basis of their constituent documents. For most businesses, this is the charter. Meanwhile, its incorrect design may cause serious problems in the future.
The charter is considered the constituent document for most legal entities, with the exception of complete and limited companies. It reflects all the main issues related to the activities of the enterprise. The charter begins with the name of the legal entity and ends with the procedure for its termination. Also, the charter regulates the powers of certain governing bodies of a legal entity. For example, most contracts state that the director of one or the other party acts on the basis of the articles of association.
In some cases, the provisions of the charter have the force of legal norms for the enterprise. This happens when the relevant relationship is not regulated by law. In addition, the legislation allows that certain conditions can be regulated by the charter in their own way.
When creating any legal entity, its charter is approved by the founder (s). Such approval is formalized by the decision of the founder or the minutes of the constituent assembly. After the approval of the charter, it, along with other documents, is submitted for state registration of a legal entity.
The charter of a legal entity can be conditionally divided into several blocks. The first part of the charter contains information about the name of the legal entity, its location, structural divisions, goals and types of activities. The second block of the charter should be devoted to the participants of the legal entity, as well as their rights and obligations. This is followed by sections concerning the procedure for the formation of the property of a legal entity and its authorized capital.
A very important part of the charter is the provisions concerning the governing bodies and their powers. Their incomplete or contradictory content is often the basis for all kinds of corporate conflicts. Therefore, the charter must clearly indicate the structure of the governing bodies of the legal entity, the procedure for their election (appointment), their powers, as well as the procedure for making decisions. In addition, it is desirable to provide for the procedure for replacing the head of the enterprise in the event of his temporary absence in the charter.
The charter is completed by provisions concerning the procedure for the liquidation or reorganization of a legal entity. Here it is necessary to prescribe not only the appropriate procedure, but also to determine the order of satisfaction of creditors' claims.
The above list of information that the charter should contain is not exhaustive. So, it may include provisions regarding the labor collective, the implementation of foreign economic activity, the procedure for keeping records and reporting. In addition, for some forms of legal entities, legislation presupposes the presence of other mandatory information in the charter.
Changes are made to the charter from time to time. This is done by drawing up a separate document with the text of the changes or setting out the entire charter in a new edition. Changes to the charter are approved according to the procedure established by the supreme management body of the enterprise and are subject to state registration.