October 12, 2020
Running a company involves a lot of paperwork. There are many forms that need to be filed with the state--some that will depend on what your business structure is, and some that are optional but good to have.
Even after a few years of being in the world of business, you may still feel overwhelmed by legal terms and documents you never even knew existed. A Certificate of Incumbency is one of these important, but not necessarily well-known, documents.
We’ll explain what this certificate is and why it needs to be certified.
Let’s get into what Certificates of Incumbency are all about and why they’re important.
Certificate of Incumbency Defined
A Certificate of Incumbency, sometimes also called an incumbency certificate, is a legal document issued by a corporate entity--Limited Liability Company (LLC) or a corporation--that establishes who the directors, officers, and key stakeholders are.
It specifies who each person is and what position they hold.
This document most commonly serves as validation for identifying who is able to enter into legally binding agreements on behalf of the company, or in other words, who the company’s signatories are.
Commonly the directors, officers and shareholders who are identified in the Certificate include, but are not limited to:
- President
- CEO
- Secretary
- Treasurer
The document certifies the identities of who is authorized to sign official documents on behalf of the company, rendering them legally admissible.
Issuing a Certificate of Incumbency
A company’s secretary will draft up a Certificate of Incumbency document and usually will include the corporate seal. It can be notarized by a public notary, but this is not necessarily required. It tends to vary from state to state, so ensure you know your local regulations (or at least hire a legal expert who can guide you through them!).
Since this is considered an official act of the company with the Secretary as the officer in charge of records, the Certificate is an official corporate document and third parties will accept its validity.
In addition to the officers’ names and titles, the Certificate of Incumbency includes whether or not they were elected or appointed, and how long their term is. Oftentimes, the document will include each officer’s signature as well, in order to provide a sample for verification.
The language on the form itself is not too complex and would generally read something like the following boilerplate:
“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.
- Pursuant to the Company bylaws (or Articles of Association) adopted by the Board of Directors, the person’s listed are authorized to act on behalf of the Company to enter into legally binding and enforceable agreements and transactions.”
This would then be followed by a list of names, titles, signatures, the date, and then finally the secretary’s signature at the end. It is not necessary to have any witnesses to the signing, as the secretary’s signature automatically validates the document. The information needs to be kept up-to-date as new members join the company and old members leave.
The Certificate of Incumbency is then stored in the company’s Minute Book. A Minute Book is an important document which contains copies of all key company documents and records.
The contents of the Minute Book will vary from company to company, but the key documents to include here are:
- Corporate Articles
- Bylaws
- Directors’ Resolutions
- Shareholders’ Resolutions
- Annual Reports
- Shareholders’ Meeting Minutes
- Directors’ Meeting Minutes
These are just some of the many official documents that you will need to prepare when starting up a corporation or LLC. Depending on your choice of business entity, your tax status, and what state you are operating in, there may be additional filings you are not aware of.
For this reason, it is again, highly advisable to hire a business attorney to help you establish your business and ensure you do not make any costly mistakes from the beginning. BizCounsel can provide a source of expert legal counsel at a small business budget. Legal peace of mind is not nearly as expensive as you may think!
Using a Certificate of Incumbency
Some of the common times that a Certificate of Incumbency will be requested will be when the company is setting up its financial accounts. For example, when you first go into a bank to open up your corporate account, they will want to verify that whoever is there is authorized to open accounts in the company’s name.
If you want to bring on legal counsel, they will need to verify the identity and position of the person who is establishing the relationship and also to know who the main decision-makers in the company are, if they’re not dealing with the lawyers directly from the start. They will need to know this in order to get their signature on any official and legally binding documents issued on behalf of the company.
Oftentimes, the Certificate of Incumbency will be required when making any overseas deals. When you have to send the document over to an international organization, you will likely have to attach an Apostille to the notarized Certificate, if the foreign country are members signed onto the Hague Convention.
Summary
A Certificate of Incumbency is an important document needed when signing official documents, opening accounts, or entering into partnerships. It’s important for the other party to verify the identities and confirm that who they are dealing with is an official agent of the company. Otherwise, it would be difficult, especially with international agreements, to ensure documents were truly legally binding between organizations.
A document like the Certificate of Incumbency is just one of many that are needed to properly start and manage a business. If you’re not an expert in business law yourself, you may overlook certain documents and filings, which could lead to costly issues down the road.
For peace of mind and to prevent mistakes like this, it’s highly advisable to seek help from a legal professional early on. They can be your advisor every step of the way and ensure you’re everything is set up properly.
Make it easy on yourself and explore how BizCounsel can help make handling the legal side of your business easier than it’s ever been.
Sources:
https://www.investopedia.com/terms/i/incumbencycertificate.asp
https://www.lawdepot.com/law-library/faq/certificate-of-incumbency-faq-united-states/
