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The Charter of a Limited Liability Company (LLC)

The Charter of a limited liability company (LLC) is a document that defines the procedure for managing a company by its founders. In a rapidly changing economic environment and legal regulation, a well-drafted charter plays a key role in ensuring the stability and predictability of business processes and protecting the interests of society’s participants. The Charter defines not only the basic principles of activity but also the rights and obligations of the founders and regulates issues of management, profit distribution, and the liquidation procedure of the company. In this article, we will look at the main elements of the LLC’s Charter, its significance for its participants, and tips on properly drafting it, considering current legal requirements.

What is a Limited Liability Company (LLC)?

A limited liability company (LLC) is one of the legal forms in which companies (business entities) are established in Belarus. 

LLC members can be individuals or companies, and the total number of members can range from 1 to 50. 

The LLC’s authorized capital is divided into shares. Before the company’s state registration, the LLC’s participants agree on the amount of the authorized capital and the distribution of their shares in it. Limited liability means, in this case, that the liability of the LLC’s participants for its debts is limited by the value of the contributions made to the LLC’s authorized fund.

The company’s name must necessarily indicate that the company was created as an LLC. An LLC cannot issue shares.

What is the Meaning of the Charter for the LLC and the Founders?

The Charter is the founding document of an LLC. It is compiled before the company’s state registration. The registration authority will not register a company without a charter, which is issued according to uniform requirements and approved by the LLC’s founders. 

The founders sometimes need help understanding the importance of the content of the Charter. Often, the content of the Charter is treated formally. However, in the future, the provisions of the Charter will help resolve disputes that may arise between LLC participants due to different positions on the company’s management and determining its development paths. Therefore, at the stage of drafting the Charter, it is important to delve into the provisions of this document. 

We recommend contacting an experienced lawyer to draw up and issue the Charter of an LLC in accordance with the state’s requirements and taking into account your wishes as a founder.

What is the meaning of the Charter for the founders of the LLC:

1. Definition of Rights and Obligations  

 The Charter defines each founder’s rights and obligations. It ensures legal certainty and prevents possible conflicts between the participants.

2. Control Regulation  

The document describes the structure of the company’s management bodies, the decision-making procedure and the functions of management bodies, such as the general meeting of participants and the director. It makes it possible to establish effective management and distribution of responsibility.

3. Protection of Interests  

The Charter protects the founders’ interests. It may contain provisions on withdrawal from membership and on the procedure for distributing profits and losses.

4. Basic Business Processes  

The Charter may contain important aspects related to doing business, such as rules on large transactions, additional contributions, distributing votes at a general meeting, and other operations which help organize effective business processes.

5. Legal Basis  

The Charter is a legal document that can be used in legal proceedings. It confirms the company’s status and rules, making it an important tool for protecting the company’s rights and interests.

6. Flexibility and Adaptation  

The articles of association can be amended according to the founders’ needs. This allows it to adapt to changes in business and state requirements, which is important for the company’s sustainability and development.

In general, the Charter is an important tool that helps founders clearly define their rights and obligations and provides legal protection and support for the effective functioning of the company.

What Should Be in the Charter of a Limited Liability Company

The state imposes several requirements on the content of the LLC’s Charter. The founders must resolve certain issues among themselves before including them in the Charter. Founders are not required to include some issues in the articles of association, but they can do so. 

The types of activities of an LLC are not required to be specified in the articles of association. However, if an IT company wants to become a resident of the Belarusian Hi-Tech Park, it makes sense to specify in the Charter the types of activities allowed for park residents. 

The websites of registration authorities provide an approximate form of the Charter. However, it is important for LLC participants to understand how the content of the articles of association can affect the company’s management, its activities, and the relationship between the founders.

What Information Should Be in the Charter of a Limited Liability Company

The charter of a LLC must contain mandatory information:

  1. The name of the LLC.
  2. The location of the LLC. It is where the permanent management body of the company or the management organization is located.
  3. The objectives of the LLC’s activities (this is profit-making).
  4. The list of participants of the LLC.
  5. Information on the number of shares of each participant in the authorized fund of the LLC as a percentage or as a fraction relative to the value of the participant’s contribution and the size of the authorized fund.
  6. The size and composition of the contributions of the LLC’s participants to its authorized capital. The contribution can be monetary, property, or in the form of rights supported by documents.
  7. The name of the management body of the LLC, which resolves the issues of creation and liquidation of representative offices and branches of this company.
  8. The procedure for withdrawing an LLC participant from the membership and its exclusion.
  9. The procedure for transferring a share (part of a share) in an LLC’s authorized fund to another person and foreclosing on a participant’s share (part of a share) in the authorized fund.
  10. The procedure for managing an LLC’s activities: the procedure for appointing (electing) the management bodies of an LLC. The management body of an LLC is a meeting of participants (participants are the founders of the NGO after its state registration). Usually, the founders agree to hire a director as the executive body of an LLC, but it is possible to create a board of directors (supervisory board).
  11. Usually, the Charter prescribes the rights and obligations of LLC participants, the competence of LLC management bodies and the order in which they make decisions. The articles of association may specify the procedure for determining the number of votes of LLC participants in proportion to their share in the authorized capital.
  12. The procedure for deciding on the liquidation of an LLC.

What Issues Do the LLC Participants Need to Resolve 

In addition to determining the name and location of the company, LLC participants need to resolve several issues to enter the correct information into the Charter. In particular, participants need to identify:

  1. The size, composition and ratio of their shares in the authorized capital. Non-monetary deposits should be valued in money, and foreign currency should be converted into Belarusian rubles.
  2. The name, composition, and competence of the LLC’s executive body (director or board of Directors). You can appoint an individual founder as a director.
  3. Issues of profit distribution between the participants.

What Issues Can the Founders of the LLC Resolve and Include in the Charter

LLC participants can resolve several issues among themselves and add them to the articles of association to simplify the company’s management. In the future, decisions on these issues can be changed by adopting a decision at the general meeting of LLC participants and amending the articles of association. 

When it is possible not to make decisions on certain issues in the Charter of an LLC but to resolve them at a general meeting of participants, it is necessary to weigh the pros and cons of making decisions on these issues in the Charter. To understand the pros and cons of making certain decisions in the Charter, you can consult with an experienced lawyer on company registration issues.

For example, the members of an LLC can make their decisions on the following issues in the articles of association:

  1. Does it make sense to limit the maximum size of a participant’s share in the authorized capital and the possibility of increasing or decreasing the shares of participants. 
  2. Will the profit of the LLC be distributed among the participants in proportion to the size of their shares in the authorized capital.
  3. Is the consent of the LLC participants required to transfer or sell a share in the authorized capital by one participant to one or more LLC participants? If permission is required, the procedure for obtaining it must be determined.
  4. Is it necessary to prohibit the alienation of a share (part of a share) of an LLC participant to third parties.
  5. Is a notarized form of transaction required for the alienation of a participant’s share (part of a share) in the authorized fund of an LLC.
  6. Do the participants of the LLC enjoy the pre-emptive right to purchase a share (part of a share) of a participant disproportionately to the size of their shares in the authorized fund.
  7. The procedure for the implementation by the participants of a limited liability company of the pre-emptive right to purchase a share (part of a share) of a participant in the authorized fund of an LLC.
  8. Is it necessary to prohibit the transfer of a share of an LLC participant as collateral to a third party.
  9. Is the consent of the LLC participants required to transfer the share of the LLC participant individual to his heirs (to the legal successors of the LLC participant – the company).
  10. On the possibility of sale, gratuitous transfer to members of the management bodies of the LLC, employees of the LLC of the participant’s share, which passed to the LLC.
  11. Whether to establish a ban on increasing the authorized capital in the event of a change in the membership of the LLC.
  12. The procedure for distributing votes of LLC participants for making decisions on certain issues.
  13. The procedure for disclosing information about the conclusion of an agreement on exercising the rights of LLC participants to other LLC participants who have not concluded such an agreement. 
  14. Is it necessary to create an audit commission of the LLC.
  15. The procedure and form for holding general meetings of participants.
  16. On the specifics of decision-making on transactions with the interest of affiliated persons, large transactions.

Amendments to the Charter of a Limited Liability Company

Amendments and additions to an LLC’s charter must be registered with the registration authority in the same manner as the articles of association after payment of the state fee. It may look like appendices to the charter or as a new version of the articles of association.

In some cases, LLC participants are required to amend the articles of association and send them for state registration:

  1. When changing the name of the LLC.
  2. When the membership of the LLC changes.
  3. When the authorized capital of an LLC has not been formed within 12 months after the company’s state registration.

In these cases, amendments to the charter must be made within two months.

You can learn about the procedure for amending the charter for the LLC and their state registration by consulting an experienced lawyer on the issues of state registration of companies. 

It is important to understand that there is no need to amend the charter when the company’s location changes. In this case, it is sufficient to notify the registration authority about the change of the LLC’s address.

Contact us

If you have any questions or disputes regarding managing a company and drafting the LLC’s charter in Belarus, we will be happy to help! Our long-term experience in divident payment will help you resolve any disputes in this area.

  • +37529366-44-77 (WhatsApp, Viber, Telegram);
  • info@ambylegal.by.
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