Statutes

What it means

Statutes are the basic internal document of a joint-stock company and a simple joint-stock company, governing how it operates. They set out the business name, registered office, objects, share capital, the type and number of shares, the company’s bodies and their decision-making rules.

The founders approve the statutes when the company is formed, and the general meeting can amend them. In a limited company the articles of association play a similar role, but most of their rules are set by law. The statutes of a joint-stock company allow more freedom.

Other legal entities also have statutes, such as civic associations, trade unions or housing cooperatives. In those cases they govern membership, bodies, financial management and dissolution.

How it works in practice

When a joint-stock or simple joint-stock company is set up, we help draft statutes that fit actual needs: who elects the board of directors, what powers the supervisory board has, how the general meeting is called and what rules govern share transfers.

In a simple joint-stock company, popular with start-ups, the statutes often provide for different classes of shares with different rights, such as preference shares for investors. These rules must be consistent with investor agreements and the cap table.

We record every amendment to the statutes and file the full text with the commercial register’s collection of documents. When preparing the financial statements and paying dividends we check that decisions comply with the statutes.

What to watch out for

Unclear or outdated statutes can block decision-making, for example when they require a quorum that cannot be reached or refer to repealed provisions of the law. When the law changes we therefore recommend reviewing the statutes.

Decisions of company bodies taken in breach of the statutes can be challenged in court. For important steps, such as increasing share capital or paying dividends, we strictly follow the procedure the statutes prescribe.