The company’s charter is one of the key documents that regulate the internal activities of any organisation and, at the same time, the founding document. The charter defines the basic principles of management, the rights and obligations of the participants (the owners who founded the company), and the procedures for making managerial decisions. The charter is the basis for several company operations and ensures its legitimacy and transparency. In this article, we will look at what a company’s charter is, what elements it includes, and what types of charter there are.
What is a Company’s Charter
The company’s charter is its founding document (the document based on which the state registers the company). The charter includes mandatory information determined by the state as well as other information requested by the company’s founders. A company’s founders (owners) are individuals (legal entities) who have decided to establish a company.
A company will not be registered without a charter. For state registration of an organisation, two copies of the charter must be submitted to the registration authority along with the application for state registration. After state registration, one copy with a stamp on state registration is returned to the company representative, and the second remains with the registration authority.
Amendment of the Charter
Changes to the charter do not always require state registration. However, in some cases, it is not necessary to amend the charter, but it is necessary to create a new version. Regarding the amendment of the charter and the state registration of amendments, we recommend you consult our experienced corporate lawyer.
The Significance of the Charter Content for the Company
Many people treat the company’s charters as a formal document that can be downloaded from any website and submitted to the registration authority. It is difficult to assess the content of this document right away. Still, the charter is used in controversial situations related to withdrawal or exclusion from the founders, in situations of profit sharing, in deciding on a major transaction, in defining and delimiting the powers of the company’s management bodies, and in some other cases. Therefore, to audit your charter or compile it, we recommend you consult our experienced corporate lawyer.
Who Draws Up and Approves the Charter
The company’s charter is drawn up by its owners, considering the mandatory requirements for its design and content. However, you can always contact our experienced corporate lawyer, who will provide you with competent advice on the content and design of the charter or prepare this document taking into account the state’s requirements and your wishes.
Depending on the type of charter, it is approved:
- The owner of the property of a private unitary enterprise.
- The founders (participants) of a commercial organisation decide to establish the company.
- The Belarusian Government approves a model charter.
Types of Charter
Starting from October 2024, the founders of companies (with some exceptions) can choose the type of charters: individual or model. The model charter is a document approved by the Belarusian Government to make the process of state registration of companies even faster and easier. There are model charters for a limited liability company with one participant and a limited liability company with several participants.
Joint-stock companies, business partnerships, political parties, and non-profit organisations cannot use the model charter.
Features of the Individual Charter
As can be seen from the designation, such a charter is drawn up taking into account the individual requests of the founders (the owners of the property of a private unitary enterprise) and the requirements of the law.
The state determined the mandatory content of such a charter. At the same time, the founders (the owners of the property) made their own decisions on several provisions of the charter. For example, they independently determined the size of the authorised capital (except for joint-stock companies).
What Information Should be Included in the Company’s Charter
Here is a list of mandatory information that should be included in the company’s charter, using the example of a company with several founders:
1. Company name.
2. The address where the permanent management body or managing organisation of the company is located.
3. The main objective of the company’s activities is profit-making.
4. The list of company members.
5. Information on each participant’s shares in the company’s authorised capital, expressed as a percentage or fraction, and the size of the authorised capital.
6. The size and structure of participants’ contributions to the authorised capital. Deposits can be monetary, proprietary, or in the form of rights specified in the documents.
7. The name of the company’s management body, which makes decisions on establishing and liquidating its representative offices and branches.
8. The procedure for the withdrawal of a participant from the membership, as well as the procedure for his exclusion.
9. Rules for transferring a share (or part of a share) in the authorised capital of a company to another person, as well as foreclosure on this share.
10. Principles of company management, including management bodies’ appointment process (election). Governing bodies usually consist of a meeting of participants (founders after state registration). Founders often agree to hire a director as an executive body, but creating a board of directors is possible.
11. The Charter stipulates the participants’ rights and obligations, the competence of the governing bodies, and the procedure for their decision-making. The voting procedure that is not based on the proportional distribution of shares can also be determined.
12. The procedure for deciding on the liquidation of the company.
The mandatory information for joint-stock companies will be slightly different, given that they have a minimum authorised capital size and are divided into a certain number of shares.
What Information Can be Included in the Company’s Charter
The founders can resolve several issues related to the company’s management on their own and include in the charter the procedure for resolving such issues. Among the issues on which the founders can make their own decisions and include them in the charter:
1. Does it make sense to impose restrictions on the maximum size of the participant’s share in the authorised capital and the possibility of changing the size of the participants’ shares?
2. Will the company’s profits be distributed among the participants without considering the proportion of their shares in the authorised capital?
3. Is the consent of the participants necessary for the transfer or sale of a share in the authorised capital by one participant to another? If consent is needed, the procedure for obtaining it must be determined.
4. Is it necessary to impose a ban on the alienation of a share (or part of a share) of a company participant to third parties?
5. Is it required to notarise the transaction to alienate the participant’s share (or part of the share) in the company’s authorised capital?
6. Do the participants have a pre-emptive right to acquire a share (or part of a share) of a participant, which does not depend on the size of their shares in the authorised capital?
7. What is the procedure for the participants to exercise their pre-emptive right to purchase a share (or part of a share) of another participant in the authorised capital?
8. Is it necessary to prohibit the transfer of a participant’s share as collateral to third parties?
9. Is the participants’ consent required to transfer an individual participant’s share to his heirs or legal successors?
10. On the possibility of selling or transferring, free of charge, to other members of the company’s management bodies or employees the share of the participant that has become the company’s property.
11. Should an increase in the authorised capital be prohibited in the case of a change in the membership?
12. What is the procedure for distributing the participants’ votes to decide on certain issues?
13. What is the procedure for disclosing information about the conclusion of an agreement on the exercise of the rights of participants to other participants who did not participate in such an agreement?
14. Is it necessary to create an audit commission?
15. What is the procedure and form of holding general meetings of participants?
16. Features of decision-making on transactions involving affiliated companies and large transactions.
The range of issues for joint-stock companies is slightly different. To clarify the information you are interested in regarding the mandatory and possible content of the individual charters, please consult our experienced corporate lawyer.
Features of the Model Charter
The model charter is an innovation in Belarusian corporate practice. The founders are not required to use a model charter; they can choose whether to draw up an individual charter of the company or use a model one.
The registration authority indicates that the company operates under a model charter in the Unified State Register of Legal Entities and Individual Entrepreneurs (USR).
The Content of the Model Charter
Unlike an individual charter, a model charter do not include the following information:
- Name of the legal entity.
- Location and size of the authorised capital of the legal entity.
- Property owners (founders and participants).
- The size of the participants’ shares and the size and composition of their contributions.
- Limits of subsidiary liability of the participants of the additional liability company.
- The amount and composition of the share contributions of the production and consumer cooperative members.
- The size and conditions of subsidiary liability of the members of the production cooperative for the cooperative’s obligations.
- Representative offices and branches.
- The size and procedure of subsidiary liability of the association members (or union).
However, since the state requires certain content of the charter for companies of various forms (and there is no such information in the model charter), the necessary information will be indicated in the Unified State Register of Legal Entities and Individual Entrepreneurs based on an application for state registration of the company.
We recommend that you consult with our experienced corporate lawyer to determine which charter is appropriate in your case.
Sample Charter
Sample charters can be found on the registration authorities’ websites. These are documents in which, after downloading, you need to enter information that should be in the charter (for example, about the name, location of the company, and authorised capital). Then, such a charter is approved and sent with other documents to the registration authority or a notary for state registration.
We recommend discussing all the risks of using such documents for your future company in consultation with our corporate lawyer.
Conclusion
In conclusion, we note that the company’s charter is the most important constituent document that defines the structure of the company’s management bodies and the procedure for their decision-making. The charter is necessary for the state registration of the organisation and confirms the legal status and specifics of decision-making in the company before third parties, particularly the state and banks, in case of a request for financing (loans). The charters allow you to choose the most appropriate form for a particular business, taking into account the specifics of its activities and the needs of the founders.
Choosing the right type of charter is the key to the company’s successful operation and minimising future risks. Understanding the meaning and structure of the charter will help entrepreneurs manage their affairs more effectively and protect their interests. Thus, attention to detail in the development and revision of the founding document is an important aspect of any organisation’s strategic management. We are always ready to advise you on the choice of the type of charter and its content, draw up and issue a charter for you and represent your interests in government agencies.
Contact us
If you have any questions or disputes related to meaning and structure of the charter in Belarus, we will be happy to help! Our long-term experience in сorporate law will help you resolve any disputes in this area.
- +37529142-27-19 (WhatsApp, Viber, Telegram);
- info@ambylegal.by.
