A certificate of incumbency is a document issued by a corporation that shows the names of the directors, officers, and shareholders involved in the organization.
It’s often requested and used by banks whenever a company opens an account, that way the bank can check the name of the director of the company against the certificate of incumbency to make sure that they are who they say they are.
How Does A Certificate of Incumbency Work?
Typically these papers are issued by the corporate secretary of the business and will bear the seal of the company whenever it is written.
Since the secretary keeps records, then a third party can trust that the certificate is a company record and can trust that the information on it is accurate.
The certificate shows all the names of the directors and officers in higher positions in the company, and it also shows their positions within the company, the term of their office, if they were elected or appointed by their peers, and their signatures.
Then it ends with the secretary’s signature and the date.
Why Do You Need a Certificate of Incumbency?
Typically a certificate of incumbency is required whenever the company wants to have a major transaction go through a bank or to open up a bank account.
Since a company will typically send a representative to the bank, the bankers might request a certificate of incumbency to make sure everything matches up.
So if ‘Jacob Fagan’ is the president of the company and he comes to the bank, he can give them the certificate and it will say his name as the company's president.
Additionally, it will have all the information about his job, and his signature.
Once the names are matched up, then the transitions or opening of accounts can go through.
The Certificates of Incumbency are mostly used for confirmation of identity, both by banks and by attorneys.
If an attorney is preparing a contract that details transactions between different companies, then the incumbency certificates allow them to see what person can legally bind the company for these contracts.
What is Being Certified?
The main thing that is being certified is the identities of the people signing the document, and the certification allows everyone on the list to make agreements on the behalf of your businesses or corporation.
Despite this importance, you do not need witnesses or anything else to make the document legally valid.
All you need is the secretary of your business to sign the document and then it will be legally valid.
What does a Certificate of Incumbency Look Like?
Most of the document would read like an old-timey letter, which could sound like the following:
“The undersigned, [Secretary’s Name], Secretary of [Company Name]. (hereafter the "Company"), hereby attests that:
He/she is the elected and acting Secretary of the Company and is responsible for issuing and maintaining the records, minutes, and seal of the Company.
Pursuant to the Company bylaws (or Articles of Association) the people listed below hold the position set forth opposite their names with the Company, the signature appearing opposite each such officer's name is their own true signature.”
Then, all the signatures, names, and titles would be listed, and it would be followed by the signature of the secretary as the last name.
It looks something like this too:
Once the document is finished and kept up to date, then it is placed in the Minute Book of the Company.
If the certificate needs to be changed for whatever reason, then there are several processes in place that will allow you to make these changes
The most common reason that a certificate will need to be changed is because of staff changes.
If an old member leaves the company, then someone new will need to be signed on in their place.
What Goes in the Minute Book?
The Minute Book for any company contains the corporate articles, bylaws, reports, and of course the minutes for any shareholders and directors meetings that might be held.
Any official document goes into the minute book and will need to be kept up to date as time goes on and new and old employees exit and leave the company.
Additionally, the certificate of incumbency helps to confirm that everyone who has signed the certificate is able to uphold the accuracy of the Minute Book and confirm that the Minute Book is legitimate.
When Do You Use A Certificate of Incumbency?
As stated, the certificate of incumbency is used whenever the company sets up financial accounts.
However, it can also be used for two more reasons.
First, if your company wants to bring legal counsel into things, the lawyers will need to see that the identity of who they are working with.
They’ll also need to understand who the decision-makers in the company are, and a certificate of incumbency is the best way to provide that.
Also, if your company plans to make any overseas deals, then the certificate will have to be notarized and sent along with it.
This helps both parties verify one another’s identities and make sure that everything is legally binding.
Without the certificate of incumbency, it would be very hard to verify that someone is who they say they are, and that can slow down or even stop the cogs of your business.
No one likes that, so it’s important to get your certificate of incumbency and keep it up to date so you can easily start your business.
Answering the question of what is a certificate of incumbency is the easy part, but the hard part is making sure you know when to use it and how to keep it up to date.
But once you learn that, then it’s another document that can make running your company even smoother.
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