Charter (certificate of incorporation) is the document that legally creates your corporation and encodes the highest-level rules about shares, governance, and stockholder rights.

How it works

When you incorporate in Delaware or another state, you file a charter with the secretary of state. It states the company name, registered agent, authorized share count, and par value. For venture-backed companies, the charter also defines share classes: common for founders and employees, preferred for investors. Each preferred series (Series A, B, etc.) can have distinct liquidation preferences, conversion rights, dividend rights, and protective provisions. Many investor protections require charter amendments, which need board and stockholder approval—often a majority of preferred voting together. Bylaws handle day-to-day governance; the charter is harder to change and sits above them for corporate law purposes.

Why it matters

• Founders: Your ownership, founder share vesting mechanics (if in charter), and ability to issue new shares all trace back here. A sloppy initial charter creates expensive legal clean-up before institutional money.
• Investors: Term sheet economics become real only when reflected in an amended and restated charter. Liquidation stacks, pay-to-play, and protective provisions determine downside protection and control in exits or down rounds.
• Operators: Option pools and authorized but unissued shares must fit within charter limits; running out of authorized shares blocks new grants until an amendment.

Common mistake

Treating the term sheet as finished when the charter still shows a single class of common stock. Until charter amendments close, investor rights may not legally exist.

Related ideas

Certificate of incorporation, bylaws, stockholder agreement, protective provisions, and authorized shares are the documents and concepts tied directly to the charter.