The corporate charter is a legal document that is prepared to define the establishment, constitution and function of a corporation.
That is, a corporate charter defines the articles of adherence of a corporation. It may be the case that a company is incorporated to work in a new corporation or that a new corporation of companies is being formed.
Of course, being a legal document, the corporate charter must be filed with a state agency. This body will be the one required according to the legislation and state structure of each country. In addition, it is responsible for authorizing the registration of the business corporation.
Generally, a corporate letter should include important information such as the name that the corporation will bear. If it will work with or without profit and the definition of the corporate statutes.
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Practically, a corporate charter defines the beginning of the constitution of a new corporation or company. After being approved by the State body in charge, the organization acquires legality and legitimacy. Therefore, it must be approved before the corporation begins to operate and function.
What parts should a corporate letter have?
The most important parts that a corporate letter should include are:
In principle, the corporate charter must indicate the name of the new corporation or company that is expected to be incorporated. The name can be placed by means of a phrase that allows a brief description of the corporation. Or write the full name that the organization will legally bear.
Some examples could be:
- Apple Inc.
- Johnson & Johnson.
- Exxon Mobil Corp.
2. Objectives of the corporation
Next, the mission, vision and values of the company should appear. Since, with this information, the corporate culture, the objectives that are expected to be achieved and the company’s business plan can be known. It also helps to understand the commercial activity in which the company is engaged, the sector in which it competes and gives an idea of the goods and services it offers to the market.
- Google Mission: “Organizing the world’s information so that it is universally accessible and useful.”
- Google Vision: “To be the most prestigious and the most important search engine in the world, in addition to being a free, easy-to-use service that presents relevant results in a fraction of a second”.
3. Classification of the organization
Then, the classification of the corporation or company must be placed. This section states whether the company will work with the objective of obtaining profits, that is, for profit. Or, if the company expects to function as a non-profit organization.
Below are some examples of organizations that operate for profit and others that work without the purpose of profit.
- Doctors without borders.
- International Amnesty.
4. Location of the corporation
Immediately, the address of the physical space where the company is located to work must be placed. This information is very important because it allows the government of the country where the company operates, to know where the people in charge of the company or corporation can be located.
Of course, if the company operates with several branches within a country, it will have to provide all these addresses.
For example, the address of Nestlé in Switzerland. The address of our main offices is:
Nestle Avenue 55
5. Share definition
Later, it will appear according to the requirements of each government, if the company intends to go out and sell shares. It might even be required to clearly define the number of shares the company expects to sell in the initial public offering and the price of the shares.
As an example, we can mention the multinational Coca-Cola FEMSA. Which is located in Mexico and which in its initial public offering decided to go out and sell US$1 billion in shares.
6. Members that make up the corporation
Subsequently, the organizational structure of the corporation is described and the responsible members are indicated. A corporate charter includes the names and addresses of both the founding members, directors and responsible corporate officers.
In the case of Apple, when the company started, Steven Jobs was a founding partner of the company and also served as CEO.
Finally, this section contains the information regarding the period of time in which the company expects to operate. Some could express their intention to operate in short periods of time and others express the intention to operate in an unlimited or indefinite period of time.
It is important for any company to write a corporate letter, because it serves to:
1. Comply with the legal requirements of each country
In the first place, because in order for a company or corporation to function, it must be authorized by the government. For that reason, the corporate charter in which the company bylaws are placed is required. Once approved by the government, the company or corporation can operate legitimately and legally, being able to participate in the commercial or non-commercial activities in which it is dedicated.
2. Synthesize business goals and values
Secondly, in the corporate charter a synthesis of the objectives and values that form the corporate culture of the company is elaborated. When these principles are well defined, they can facilitate the planning process and the business approach of the company.
3. Protect partners and owners
Third, this document where the bylaws of the company are established grants protection to its partners and owners. Since, it limits the personal responsibility that each member has within the operation of the business.
4. Enables the trading of shares
Finally, the document, once authorized, gives the company the legal right to be able to market shares.