As a business professional, you may have encountered the term ‘charter’ without knowing what it meant. Given the legal implications of a charter, it can be intimidating to try to understand the concept. In this article, we’ll break down the meaning of charter for business professionals.
What Is a Charter?
Simply put, a charter is a legal document in which a government or other authority grants specific rights to an organization, such as a company, a church, or a charitable trust. Much like a birth certificate, it is a form of recognition that grants a certain legal status to the entity. For example, a company may have a charter that grants it the power to operate as a limited-liability corporation or as a non-profit organization.
What Does a Charter Include?
The contents of a charter vary depending on the entity it is for and the laws of the jurisdiction in which it is established. Generally speaking, however, a charter will contain information such as: the legal name of the entity, its structure, its purpose, its objectives, and its rights and responsibilities.
Why Is a Charter Important?
A charter is important because it grants a certain legal status to the entity it is for. This status grants the entity certain rights and privileges that it would not otherwise have. For example, a charter may grant the entity legal protection from individual creditors or grant it the right to receive tax exemptions. Ultimately, having a charter affords an entity with the power to enforce its rights in the court of law.
Conclusion
From the basics above, we can see that a charter is an important legal document that grants an entity certain rights and privileges that it wouldn’t have without it. As a business professional, it is vital to understand the concept of charter and its implications for the legal status of an entity.</