Constitutional documents
Encyclopedia
In relation to artificial persons, the constitutional documents (sometimes referred to as the charter documents) of the entity are the documents which define the existence of the entity and regulate the structure and control of the entity and its members. The precise form of the constitutional documents depends upon the type of entity.
jurisdictions divide the constitutional documents of companies into two separate documents:
In many countries, only the primary document is filed, and the secondary document remains private. In other countries, both documents are filed.
In civil law
jurisdictions, the company's constitution is normally consolidated into a single document, often called the charter
.
It is quite common for members of a company to supplement the corporate constitution with additional arrangements, such as shareholders' agreement
s, whereby they agree to exercise their membership rights in a certain way. Conceptually a shareholders' agreement fulfills many of the same functions as the corporate constitution, but because it is a contract, it will not normally bind new members of the company unless they accede to it somehow. One benefit of shareholders' agreement is that they will usually be confidential, as most jurisdictions do not require shareholders' agreements to be publicly filed.
Another common method of supplementing the corporate constitution is by means of voting trust
s, although these are relatively uncommon outside of the United States
and certain offshore jurisdictions
.
s also have constitutional documents in the form of a partnership agreement. In some jurisdictions, a more formal constitution, sometimes referred to as articles of partnership or a partnership deed is used (particularly where the partnership has certain corporate aspects, such as a Limited Liability Partnership
). However, many partnerships are not created formally, and may have no written partnership agreement and leave the regulation of the partnership to be regulated in accordance with the understandings of the parties and by general law. Some of the largest partnerships in the world have no written partnership agreement.
is not a separate legal entity as such, but is often treated as one for certain legal purposes. Like partnerships, trusts are not normally required to have a written trust instrument
to constitute them, although most large and formal trusts do.
Companies
By convention, most common lawCommon law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
jurisdictions divide the constitutional documents of companies into two separate documents:
- the Memorandum of AssociationMemorandum of AssociationThe memorandum of association of a company, often simply called the memorandum , is the document that governs the relationship between the company and the outside...
(in some countries referred to as the Articles of IncorporationArticles of IncorporationThe Articles of Incorporation are the primary rules governing the management of a corporation in the United States and Canada, and are filed with a state or other regulatory agency.An equivalent term for LLCs in the United States is the Articles of Organization...
) is the primary document, and will generally regulate the company's activities with the outside world, such as the company's objects and powers. - the Articles of AssociationArticles of Association (law)The term articles of association of a company, or articles of incorporation, of an American or Canadian Company, are often simply referred to as articles . The Articles are a requirement for the establishment of a company under the law of India, the United Kingdom and many other countries...
(in some countries referred to as the by-lawsBylawBy-law can refer to a law of local or limited application passed under the authority of a higher law specifying what things may be regulated by the by-law...
) is the secondary document, and will generally regulate the company's internal affairs and management, such as procedures for board meetingsBoard of directorsA board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
, dividendDividendDividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business , or it can be distributed to...
entitlements etc.
In many countries, only the primary document is filed, and the secondary document remains private. In other countries, both documents are filed.
In civil law
Civil law (legal system)
Civil law is a legal system inspired by Roman law and whose primary feature is that laws are codified into collections, as compared to common law systems that gives great precedential weight to common law on the principle that it is unfair to treat similar facts differently on different...
jurisdictions, the company's constitution is normally consolidated into a single document, often called the charter
Charter
A charter is the grant of authority or rights, stating that the granter formally recognizes the prerogative of the recipient to exercise the rights specified...
.
It is quite common for members of a company to supplement the corporate constitution with additional arrangements, such as shareholders' agreement
Shareholders' agreement
A shareholders' agreement is an agreement amongst the shareholders of a company....
s, whereby they agree to exercise their membership rights in a certain way. Conceptually a shareholders' agreement fulfills many of the same functions as the corporate constitution, but because it is a contract, it will not normally bind new members of the company unless they accede to it somehow. One benefit of shareholders' agreement is that they will usually be confidential, as most jurisdictions do not require shareholders' agreements to be publicly filed.
Another common method of supplementing the corporate constitution is by means of voting trust
Voting trust
A voting trust is a trust whereby the shares in a company of one or more shareholders and the voting rights attached thereto are legally transferred to a trustee, usually for a specified period of time . In some voting trusts, the trustee may also be granted additional powers...
s, although these are relatively uncommon outside of the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
and certain offshore jurisdictions
Offshore financial centre
An offshore financial centre , though not precisely defined, is usually a small, low-tax jurisdiction specializing in providing corporate and commercial services to non-resident offshore companies, and for the investment of offshore funds....
.
Partnerships
Many partnershipPartnership
A partnership is an arrangement where parties agree to cooperate to advance their mutual interests.Since humans are social beings, partnerships between individuals, businesses, interest-based organizations, schools, governments, and varied combinations thereof, have always been and remain commonplace...
s also have constitutional documents in the form of a partnership agreement. In some jurisdictions, a more formal constitution, sometimes referred to as articles of partnership or a partnership deed is used (particularly where the partnership has certain corporate aspects, such as a Limited Liability Partnership
Limited liability partnership
A limited liability partnership is a partnership in which some or all partners have limited liability. It therefore exhibits elements of partnerships and corporations. In an LLP one partner is not responsible or liable for another partner's misconduct or negligence. This is an important...
). However, many partnerships are not created formally, and may have no written partnership agreement and leave the regulation of the partnership to be regulated in accordance with the understandings of the parties and by general law. Some of the largest partnerships in the world have no written partnership agreement.
Trusts
A trustTrust law
In common law legal systems, a trust is a relationship whereby property is held by one party for the benefit of another...
is not a separate legal entity as such, but is often treated as one for certain legal purposes. Like partnerships, trusts are not normally required to have a written trust instrument
Trust instrument
A trust instrument is an instrument in writing executed by a settlor used to constitute a trust...
to constitute them, although most large and formal trusts do.