What is a certificate of incorporation?
January 25, 2009
A Delaware corporation is considered to exist when its certificate of incorporation has been filed with the Secretary of State. Generally, the certificate is brief because very few items must be covered in the certificate to make it effective.
The certificate must include:
- the name of the corporation (this name must contain a corporate ending such as “Company,” “Corporation,” “Incorporated,” or an abbreviation thereof);
- a statement of business purpose;
- the address of the corporation’s registered office in the State of Delaware and the name of the registered agent at such address;
- a statement of the total number of shares of stock authorized to be issued and a description of the different classes of stock (if there is more than one class); and
- the name and address of the corporation’s incorporator(s).
However, there are many matters that the corporation might choose to include. Certain provisions are effective only if they are contained in the certificate. Some examples of such provisions are as follows:
- creating, limiting and regulating the powers of the corporation, the directors, and the stockholders;
- granting any Delaware court the power to order a meeting of the corporation’s creditors and/or of the stockholders to agree to any arrangement or reorganization of the corporation;
- granting stockholders the preemptive right to subscribe to additional issuances of stock;
- limiting the corporation’s duration;
- increasing the required number of votes for actions by stockholders and directors over the voting requirements set forth by statute;
- limiting certain liabilities of directors and permitting certain indemnification of corporate agents; and
- imposing personal liability for the debts of the corporation on its stockholders.
Delaware law allows a corporation to amend the certificate in any way it desires, so long as the amendment is lawful at the time the corporation chooses to add it to the certificate. Before the corporation has issued its stock, the certificate may be amended by a writing setting forth the amendment and certifying that the corporation did not receive any payment for its stock. The writing should be signed by a majority of the incorporators, if the directors have not been elected or listed in the original certificate, or by a majority of the directors if they have been elected and named in the original certificate. Once stock has been issued, the certificate generally may be amended or repealed by approval of the board and both the holders of a majority of the outstanding shares entitled to vote and the holders of a majority of the outstanding shares of each class of stock entitled to vote. Once an amendment is adopted, the corporation must file a certificate of amendment with the Delaware Secretary of State to make the amendment effective.
In some states such as California, the certificate of incorporation is referred to as the articles of incorporation. Many people use the term certificate or articles interchangably to describe the certificate/articles of incorporation.
A sample certificate of incorporation is below:
CERTIFICATE OF INCORPORATION OF
[INSERT COMPANY NAME]
The name of the corporation is [insert company name] (the “Company“).
The address of the Company’s registered office in the State of Delaware is [Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801]. The name of its registered agent at such address is [The Corporation Trust Company].
The purpose of the Company is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law, as the same exists or as may hereafter be amended from time to time.
This Company is authorized to issue one class of shares to be designated Common Stock. The total number of shares of Common Stock the Company has authority to issue is [10,000,000] with par value of $[0.001] per share.
The name and mailing address of the incorporator are as follows:
[insert name of incorporator]
[insert mailing address of incorporator]
In furtherance and not in limitation of the powers conferred by statute, the board of directors of the Company is expressly authorized to make, alter, amend or repeal the bylaws of the Company.
Elections of directors need not be by written ballot unless otherwise provided in the bylaws of the Company.
To the fullest extent permitted by the Delaware General Corporation Law, as the same exists or as may hereafter be amended from time to time, a director of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director. If the Delaware General Corporation Law is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Company shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended.
The Company shall indemnify, to the fullest extent permitted by applicable law, any director or officer of the Company who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding“) by reason of the fact that he or she is or was a director, officer, employee or agent of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any such Proceeding. The Company shall be required to indemnify a person in connection with a Proceeding initiated by such person only if the Proceeding was authorized by the Board.
The Company shall have the power to indemnify, to the extent permitted by the DGCL, as it presently exists or may hereafter be amended from time to time, any employee or agent of the Company who was or is a party or is threatened to be made a party to any Proceeding by reason of the fact that he or she is or was a director, officer, employee or agent of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any such Proceeding.
Neither any amendment nor repeal of this Article, nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article, shall eliminate or reduce the effect of this Article in respect of any matter occurring, or any cause of action, suit or claim accruing or arising or that, but for this Article, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.
Except as provided in Article VIII above, the Company reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.
I, the undersigned, as the sole incorporator of the Company, have signed this Certificate of Incorporation on [insert relevant date].
[insert name of incorporator]