What Is a Certificate of Incumbency and Why Does Your Business Need One?

A certificate of incumbency is a vital document that helps business operations. Its main purpose is to verify who has the authority to act on behalf of an organization. This article outlines what a certificate of incumbency is, why your company needs one, and how to get it.

 

What Is a Certificate of Incumbency?

A certificate of incumbency, also called an incumbency certificate, is a formal document from a corporation or limited liability company (LLC) that lists its directors, officers, and shareholders. Organizations issue incumbency certificates to confirm the individuals who are authorized to enter into legally binding transactions on their behalf.

 

Key Features of a Certificate of Incumbency

A certificate of incumbency provides details about the listed individuals, including:

• Identification of officers and directors: This section lists the names, titles, and in some cases, the signatures of key officials. These typically include the president, CEO, secretary, treasurer, shareholders, officers, and registered agents.
• Appointment details: This outlines when and how each individual came into their role, whether they were elected or appointed, and how long they’ll be in the position.
• Corporate authentication: The certificate bears the company seal, which enhances its authenticity and credibility.
• Signatures: The certificate includes the signatures of all authorized officers. It includes sample signatures to prevent forgery and make sure unauthorized parties cannot enter into fraudulent agreements.

Include all authorized signers in the certificate of incumbency to avoid legal issues and commercial litigation that could disrupt your business operations.

To further strengthen the legal validity of an incumbency certificate across various jurisdictions, you can notarize or apostille it. Also, you may hire a lawyer who can use their expertise to make sure the document meets all legal requirements.

What Is the Purpose of a Certificate of Incumbency?

Identifying a company or corporation’s signing officers is required in particular situations, including:

 

Entering Business Deals

When parties want to do business with your company, they like to know who can sign agreements on its behalf. A certificate of incumbency identifies those persons.

This is vital because if someone without that authority signs an agreement on behalf of your company, it won’t be binding. When that happens, it may result in contract disputes.

 

Opening Business Banking Accounts

A certificate of incumbency is a minimum requirement to open a bank account for your business. This is in addition to other legal documents you need to open a corporate banking or checking account under state law.

By asking for your incumbency certificate, banks make sure that whoever is opening the business account can validly do so. They do this to avoid legal issues that may result from transacting with someone who doesn’t have the authority to do so.

 

Working With Registered Agents

Sometimes, your organization may delegate a third party to act on its behalf. For instance, if you have a corporate lawyer authorized to make decisions on your behalf, the incumbency certificate will confirm their authority.

Also, incumbency certificates let lawyers know who they can share vital legal information about the company with.

 

Complying With International Business Standards

Some jurisdictions require foreign businesses to produce a certificate of incumbency before they can do certain things, such as opening a bank account or applying for a business visa for employees. This is usually a requirement in countries with strict anti-money laundering regulations and corporate governance rules. For instance, if your company wants to open a bank account in Hong Kong, the bank will require a certificate of incumbency to verify your company’s details.

Also, a certificate of incumbency helps your organization build trust with overseas partners or clients by serving as proof that the signatories have the authority to commit the company to the terms of the agreement.

 

Benefits of Having a Certificate of Incumbency

A certificate of incumbency can improve a business’ operational efficiency and trustworthiness in several ways:

 

Enhances Credibility with Banks and Investors

A certificate of incumbency shows transparency and legitimacy, which are important when you’re dealing with financial institutions or potential investors.

 

Simplifies Administrative Processes

Having a certificate of incumbency readily available can facilitate various administrative tasks, such as opening bank accounts or registering with regulatory authorities.

 

Streamlines Cross-Border Business Operations

International transactions often require additional layers of documentation to meet local regulations. A certificate of incumbency can fast-track this process by providing a clear record of authorized representatives.

 

How To Get a Certificate of Incumbency

Getting a certificate of incumbency is usually a straightforward process, but you need to make sure it’s accurate and complies with regulatory standards:

 

1. Draft the Document

Your company’s secretary can draft the certificate of incumbency. To make the process easy, you can start by listing the names of all the company’s authorized signers.

2. Sign the Document

Get all the parties authorized by the certificate to represent the company to affix their signature on it. This may include the president, CEO, secretary, treasurer, key shareholders, officers, and registered agents. Also, include the company seal to make the certificate valid.

3. Notarize the Certificate

Get a notary public to notarize the certificate if your state requires this to make it valid.

4. File the Certificate

File the certificate of incumbency with the secretary of state office in the state where the company is headquartered.

5. Update the Certificate Regularly

Corporate roles and responsibilities change with time. Update the certificate of incumbency to keep it accurate.

 

Sample Template of a Certificate of Incumbency

1. Header and Title

Start the document with a clear title, such as “Certificate of Incumbency,” followed by your company’s official name and address. Include the company’s registration number, date of incorporation, and jurisdiction.

2. Certification Statement

Write a formal statement certifying the authority of the listed officers. For instance:

“This is to certify that the individuals named below are duly authorized officers of [Company Name] and are empowered to act on behalf of the company as of the date of issuance.”

3. Officer Details

Provide a table or list with the following information for each officer:

• Full Name
• Title/Position
• Appointment Date
• Signature

4. Corporate Seal and Authentication

Include the company seal for validation. In jurisdictions requiring notarization or apostille certification, leave space for the notary’s signature and seal.

5. Authorized Signatory

End the document with the signature of an authorized officer, such as the corporate secretary. Add their full name, title, and date of signing.

 

Get Help Creating a Certificate of Incumbency

An incumbency certificate helps your operations run smoothly and stay compliant. By identifying who your authorized officers are, it makes it easier for third parties to transact with your company confidently. Our experienced business lawyers can help you create a certificate of incumbency that complies with international business standards.

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