The company charter: seven provisions that are usually forgotten

The charter is more than a registration formality

Many businesses copy a template charter to complete the registration and then file it away. But the charter is the company's constitution — it settles who holds control, how decisions are made and what the exit looks like when shareholders fall out. It is precisely the provisions that seem minor, and are usually forgotten, that decide the outcome when the company hits turbulence.

Seven provisions worth revisiting

1. The approval thresholds at the General Meeting of Shareholders and the Board for material matters.
2. The right to transfer shares and the pre-emption mechanism for existing shareholders.
3. The deadlock mechanism for when the parties cannot reach agreement.
4. Drag-along and tag-along provisions, protecting both majority and minority shareholders in a transfer.
5. The scope of authority of the legal representative and the transactions that require prior approval.
6. The principles for distributing profit and the conditions for paying dividends.
7. The procedure for amending the charter, so that one group of shareholders cannot rewrite the rules on its own.

Review it before you need it

The best time to get the charter right is while the shareholders still agree — not once a dispute has broken out. A carefully drafted charter, combined with a shareholders' agreement, is an effective line of defence for corporate governance.

TLA reviews and drafts charters and shareholders' agreements that match the actual ownership structure — contact us for advice.