Section 402 of the Business Corporation Law: Everything You Need to Know
Section 402 of the business corporation law covers the information that you must include in the Certificate of Corporation for your company. 3 min read
Section 402 of the business corporation law covers the information that you must include in the Certificate of Corporation for your company.
Contents of Section 402
First and foremost, your company's Certificate of Incorporation must include the signature and name and address of each of your company's incorporators. Once you've made sure your incorporation has all the required information, it will need to be submitted to your state.
Be certain that your Certificate of Incorporation includes the name of your company. You also need to be sure you've followed your state's naming conventions.
Next, your Certificate needs to detail your reasons for forming of your company. In most cases, you can simply state that your company's purpose is to engage in legal business activities. However, you must also make clear that your business will not take part in any activity that requires approval from a state agency, department, or official unless you have already received approval. If you state your purpose correctly, you should be able to perform business legally.
You will also need to list the county where your company will be physically located.
Your Certificate of Incorporation should describe the aggregate shares that will be issued by your company. When you are using a single class of shares, you must state their par value or include a statement that they have no par value. If you decide to issue multiple classes of shares, you will also need to indicate which shares in which class are with or without par value.
Companies that decide to divide their shares into classes will need to list:
- The relative rights provided by the shares
- Share preferences
- Limitations of shares
If your company is going to issue shares in series, you need to designate each series while describing how the rights, limitations, and preferences will vary between the series. You will also need to include a statement about what authority the company board has to designate series of shares and to fix their different limitations, preferences, and rights. There also should be a statement describing any limitations on the ability of the board to change how many preferred shares are in a series.
In your Certificate of Incorporation, you must list the secretary of state as a corporate agent that is allowed to receive service of process on your company's behalf. You also must list an address where the secretary of state can mail process after it has been received.
If your state requires your company to have a registered agent, your Certificate must include:
- The name of your registered agent
- Your registered agent's address in the state where your business will operate
- A statement that your registered agent is willing to accept service of process for your company
Unless your company lasts in perpetuity, you need to describe the planned duration of your company.
It's possible to include a provision in your Certificate of Incorporation that either limits or eliminates your director's personal liability if the director violates their duties and a lawsuit results in damages. However, this provision is not allowed to eliminate or limit liability in the case of a judgment that decides the actions of the director in question were made in bad faith, violated a law intentionally, or resulted in personal gain to which the director was not entitled. The provision also cannot limit liability for actions that took place before the provision was written.
You have the ability to add any provisions that you wish in your Certificate as long as they don't violate state law or are contradictory to the rules of Section 402.
Forming a Corporation
Section 301 of the Business Corporate Law offers guidance on the allowed descriptors for your corporation in the State of New York. In this state, the name of a corporation is required to include the words “Incorporated,” “Limited,” or “Corporation," or abbreviations of these words. Section 301 also describes what words are allowed when naming your corporation.
Using certain words in the name of your corporation requires seeking approval from the state. In addition, the name of your company must be distinct from the names of other New York limited partnerships, corporations, and limited liability companies.
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