Miscellaneous Charter Provisions

Joseph W. Bartlett, Special Counsel, McCarter & English LLP, Co-Founder of VCExperts

McCarter & English LLP


Miscellaneous Charter Provisions: The charter lists the principal place of business and the names and addresses of the initial officers and directors of the corporation. It does not require that the stockholders be identified. If the corporation is organized by a law firm, it is customary to file the papers using "dummy" officers and directors—the "dummies" being employees of the law office involved—and make the necessary changes at the initial shareholders and directors meetings. Some states insist that each corporation have at least three directors and that the charter name at least three officers: for example, president, treasurer, and clerk or secretary. The more modern statutes now allow a corporation to exist with as few as one director (in some states, close corporations may operate with none), and the founder can hold all the offices: the sole director, president, treasurer, clerk or secretary. There are, on occasion, curious local requirements, such as that the clerk be a resident of the state in which the corporation is domiciled; again, modern statutes omit such anachronisms.

The charter is deemed to be a contract between the state and the incorporators, a public document available to inspection by all. Therefore, its provisions can, by virtue of one of the many handy fictions through which the law operates, be deemed binding on all the world, including everybody who takes an interest in the corporation subsequent to the publication of the charter. There is no other instrument with this all-encompassing effect, and, therefore, a careful drafter will load up the charter with those provisions meant to be universally effective. Such provisions are known as "optional" provisions since they are in addition to the material the corporation must provide if the charter documents are to be accepted for filing. They are, however, optional in name only; if no mention is made in the charter, the law may either insert a given provision automatically or deny its right to exist outside the charter. The competent planner makes sure he understands the difference.


Introduction to Venture Capital and Private Equity Finance