The current Law on Enterprises does not provide a specific definition of a Company Charter; however, it can be understood as an agreement between members/shareholders that stipulates the organizational structure, management, and operation of the company in accordance with the law.
Pursuant to Article 24 of the Law on Enterprises, the Company Charter includes the Charter upon business registration and any Charters amended or supplemented during the course of operation:
Corporate law allows members/shareholders the freedom to agree on the contents of the Charter, provided they do not contravene fundamental legal principles and include all mandatory contents as required by law.
According to the current Law on Enterprises, the Company Charter is one of the mandatory documents required for business incorporation (except for sole proprietorships).
The Charter records the organizational structure, management, and the rights and obligations of members, shareholders, and the company's legal representative. It serves as the legal and governance basis, enabling the company to commence operations systematically and rigorously.
When a company enters the stage of stable operation, the Charter plays a vital role in all decision-making mechanisms. Article 24.2.h of the Law on Enterprises recognizes that the protocol for adopting company decisions is a mandatory component of the Company Charter.
Article 148 of the Law on Enterprises stipulates the conditions for passing resolutions of the General Meeting of Shareholders in a joint-stock company as follows: "A resolution on the following contents shall be passed if it is approved by a number of shareholders representing at least 65% of the total votes of all attending and voting shareholders...; the specific percentage shall be stipulated in the Company Charter."
Therefore, the law allows shareholders to agree on a higher percentage in the Charter to secure their operational rights, control, and interests in the company's activities.
When internal conflicts or disputes occur, the Charter becomes the critical legal basis for determining the rights, obligations, and authority of each involved party. In dispute resolution practice, Courts do not only compare the parties' actions against the Law on Enterprises but also prioritize the specific provisions of the Company Charter regarding legal representation, signing authority, meeting convocation procedures, voting conditions, and the validity of internal resolutions.
Many cases demonstrate that an individual's action or a decision deemed "unlawful" may still be recognized as valid if it conforms to the Charter in effect at the time the transaction occurred; conversely, many resolutions, meeting minutes, or transactions are declared invalid simply because they did not strictly comply with Charter regulations. Therefore, the Charter serves not only as the "internal law" of the enterprise but also as the foundational basis for dispute resolution, directly affecting the rights of shareholders, capital contributors, and the overall stability of the business.
A common mistake for many businesses, especially in the startup phase, is using off-the-shelf Charter templates without reviewing or adjusting them to fit their specific governance model and actual operations. These templates are often just frameworks that fail to clarify critical issues such as the allocation of power between multiple legal representatives or limitations on signing authority. During operation, when interests begin to clash, a template Charter that lacks detail cannot serve as a basis for dispute resolution. This forces the enterprise to fall back on general legal provisions, leading to a loss of initiative, prolonged disputes, and difficulty in protecting its own rights.
Another frequent mistake is failing to update or amend the Charter throughout the business lifespan, even when there have been significant changes in ownership structure, legal representation, business lines, or management models. A Charter established at incorporation may no longer be suitable for operational realities after a period of development, yet it continues to be used as the official internal document. When disputes arise, the inconsistency between the Charter and actual governance practices easily places the business at a disadvantage, as Courts and competent authorities typically rely on the Charter in effect to assess authority, decision-making procedures, and the responsibilities of the parties. Delays in reviewing and adjusting the Charter not only increase legal risks but can also lead to serious consequences regarding the validity of resolutions, transactions, and the personal liability of company managers.
The Company Charter is not merely a mandatory document for incorporation; it is the foundational instrument governing all internal governance activities, directly affecting the rights, obligations, and legal interests of the business, shareholders, capital contributors, and managers. Therefore, enterprises must regularly review and update their Charter to ensure consistency with their organizational structure, governance model, business strategy, and current legal regulations. This helps prevent legal risks, minimize disputes, and protect the long-term interests of the business.
With extensive experience in corporate legal consulting, Lexsol accompanies clients in drafting, reviewing, and perfecting Company Charters—from the incorporation stage through restructuring and expansion—ensuring stable and robust growth. Contact Lexsol for immediate consultation.
Lexsol is a team of young, dynamic lawyers with over 10 years of experience in advising and resolving legal matters for both domestic and international businesses.
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