In law, a charter is a formal written document issued by a governing authority — a monarch, a legislature, a regulator, or an international body — that creates an entity or grants it specific rights, powers, or privileges. The legal definition of a charter has stayed remarkably steady across centuries: it is the instrument that establishes who holds authority, what that authority covers, and the conditions attached to it. The same word covers the articles of incorporation a new company files with a state office, the founding document of a city, the license a bank operates under, and the treaty that created the United Nations.
What a Charter Does in Law
A charter performs three legal functions at once. It creates or recognizes an entity. It defines and limits the powers of that entity. And it binds the grantor to the terms it has set, at least until the charter is lawfully changed or revoked.
The binding character of a charter was settled in American law by Trustees of Dartmouth College v. Woodward in 1819. The New Hampshire legislature tried to alter Dartmouth’s 1769 royal charter without the college’s consent, converting it into a state-controlled institution. The Supreme Court struck down the state’s action. Chief Justice Marshall held that a charter granted by the Crown and accepted by the trustees created a binding contract, and that the Contract Clause of Article I, Section 10 barred states from impairing such obligations. The Court also held that a corporation set up for education or charity is not automatically a public corporation subject to legislative control.1Justia US Supreme Court. Trustees of Dartmouth College v Woodward, 17 US 518 (1819)
That decision is why a charter is more than a description or a license. It is a legal contract between the grantor and the entity, and it carries constitutional protection against unilateral change.
Corporate Charters and Articles of Incorporation
For most of American history, forming a corporation required a special act of a state legislature. Each charter was negotiated one at a time and carried tight limits on the company’s scope, its capital, and sometimes its lifespan. Legislatures granted them sparingly, mostly for transportation, banking, and manufacturing enterprises.
That system gave way to general incorporation. New York passed the first general incorporation statute in 1811, letting entrepreneurs form a corporation by filing a certificate with a government office instead of petitioning the legislature. By 1860, 27 of the 32 states and organized territories had adopted similar laws, and more than 90 percent of the American population lived in a jurisdiction where incorporation had become a routine administrative step.
What used to be called a corporate charter is now generally known as the articles of incorporation. The articles are the highest governing document of the corporation. They typically set out the corporation’s purpose, the type and number of shares it can issue, and how its board of directors is elected. They must be filed with the state at the moment of incorporation and can be amended as state law allows. Filing fees generally range from roughly $35 to $300, and most states charge an annual fee to keep the charter in good standing.
Municipal Charters and Home Rule
A municipal charter functions as a constitution for a city or county. It sets the local government’s structure, its powers, and its decision-making procedures.
The key distinction is between general law jurisdictions, which operate under rules the state legislature sets, and home rule jurisdictions, which operate under their own charter and have broader authority over local affairs. Home rule gives a community more say over zoning, taxation, and service delivery, but the state retains the power to impose restrictions, and the boundary between state and local authority is a regular source of litigation. Roughly 40 states recognize some form of home rule, though its strength varies considerably.
Bank Charters
Banks in the United States operate under one of two types of charter: a national charter issued by the Office of the Comptroller of the Currency (OCC), or a state charter issued by a state banking regulator. The type of charter determines who supervises the bank and which rules apply.
The OCC grants a national charter in two stages. Preliminary approval lets organizers proceed with building the bank. Final approval authorizes it to conduct banking business. Capital must be raised within 12 months of preliminary approval, and the bank must open within 18 months, or the approval expires. The OCC routinely imposes special conditions, including minimum capital levels, liquidity requirements, and mandatory independent audits for the first three years. For two years after a newly chartered bank opens, the OCC must review and approve the hiring of every officer and the appointment of every director.2Office of the Comptroller of the Currency. Charters – Comptrollers Licensing Manual
A national charter makes it easier for a bank to open branches across state lines and lets it deal with a single federal regulator. A state charter may offer cost savings, a higher legal lending limit, and closer access to local regulators. The choice is a strategic one for any bank.
Educational Charters and Charter Schools
University charters grant the authority to operate, confer degrees, and govern internal affairs. That authority is not unconditional. Institutions that fail to maintain accreditation standards through financial instability, governance failures, or noncompliance can lose the ability to operate and award degrees.
A charter school is a more recent application of the same concept. Under federal law, a charter school is a public school that operates under a written charter granted by an authorized public agency, with an exemption from many of the state and local rules that apply to traditional public schools. Charter schools cannot charge tuition, must admit students by lottery if oversubscribed, must comply with federal civil rights and disability laws, and must operate under a written performance contract that specifies how student achievement will be measured.3Legal Information Institute. Definition: Charter School from 20 USC 7221i(2) The charter itself is the accountability mechanism. Authorizers monitor academic performance and legal compliance, and a charter can be revoked for material violations, failure to meet academic expectations, or fiscal instability.
Charters in International Law
The charter concept extends beyond national borders. The United Nations Charter, signed on June 26, 1945, in San Francisco, is both the founding document of the UN and an instrument of international law that binds all member states. It codifies the major principles governing relations between nations, including the sovereign equality of states and the prohibition on the use of force.4United Nations. UN Charter
Its stated purposes include maintaining international peace and security through collective measures, developing friendly relations among nations based on self-determination, and achieving cooperation on economic, social, and humanitarian problems while promoting respect for human rights without distinction as to race, sex, language, or religion.5United Nations. Chapter I – Purposes and Principles (Articles 1-2) The legal structure is the same as a corporate or municipal charter — grantor, entity, defined powers, limits — with nations as the grantees and a global scope.
Royal Charters
Royal charters date to the 13th century and were originally the main way to create corporations, towns, and cities. The first royal charter granting corporate status to a group working for public benefit went to the University of Cambridge in 1231. The Bank of England was established through a royal charter in 1694, and the South Sea Company in 1711.6House of Commons Library. What Is a Royal Charter
Royal charters are still granted. They are issued by the Sovereign on the advice of the Privy Council and are now normally reserved for organizations that work in the public interest, such as professional institutions and charities, and that can demonstrate pre-eminence, stability, and permanence in their field. As of 2026, the Institution of Railway Signal Engineers and the Institute of Acoustics are among the organizations that have petitioned for charters.7Privy Council Office. Royal Charters
How a Charter Is Revoked
A charter is not permanent by nature. The authority that grants a charter can revoke it, and that possibility is what gives a charter its enforcement power.
For corporations, a state can forfeit a company’s charter through legal proceedings. Common grounds include persistent criminal conduct by officers or directors, failure to pay required annual fees or taxes, and fraud. A forfeited charter effectively dissolves the corporation and strips it of legal authority to operate. The process varies by jurisdiction, but it typically requires the state attorney general to bring a civil action and to show that the public interest demands termination.
For banks, the OCC can take enforcement action against nationally chartered banks that violate the conditions imposed in their charter, including civil money penalties and, ultimately, revocation of the charter itself.2Office of the Comptroller of the Currency. Charters – Comptrollers Licensing Manual For charter schools, the authorizing agency can revoke the charter for material violations of the contract, failure to meet academic benchmarks, or fiscal mismanagement.
The ability to revoke is what separates a charter from a mere description. A charter creates authority and creates accountability in the same instrument. An entity that holds a charter has to operate within its terms or risk losing the authority the charter provides.
Why the Definition Still Matters
The through-line from the earliest royal charters to a modern startup’s articles of incorporation is direct. A governing authority issues a written document that defines who holds power, what they can do with it, and what happens when they overstep. The Dartmouth College decision cemented the idea that these documents are binding contracts. Home rule charters gave cities autonomy over local affairs. Bank charters built the regulatory framework that still controls which institutions can take deposits and make loans. The UN Charter applied the same logic to relationships between countries. Understanding what a charter is, in the legal sense, is really understanding the standard mechanism through which authority is created and constrained.