Statement of Purpose
Joseph W. Bartlett, Special Counsel, McCarter & English LLP, Co-Founder of VCExperts
McCarter & English LLP
2002-08-02
The charter requires a statement of the purpose(s) for which the corporation is organized, a section into which the draftsmen were once accustomed to pour a good deal of care. Recent usage, however, supports the practice of making brief mention of the principal purpose of the corporation and then tagging on a line authorizing the corporation to engage in any business in which a corporation organized in the state may lawfully engage. Such "basket" language is now thought adequate to overcome any objection that a particular corporate activity is ultra vires (beyond the power of the corporation) because no specific mention thereof has been made in the charter. When investors or creditors wish to restrain a corporation from roaming far afield, negative covenants in a loan or stock purchase agreement are deemed more flexible than charter provisions.