General Guides
Key takeaways
- A certificate of incumbency is a document that declares the directors, officers, and key shareholders of a company
- It is often required by legal or financial institutions to prove which named representatives are entitled to do business on the company’s behalf
- Incumbency certificates can also be used for international trade but may require an apostille to be attached
- Ensuring a certificate of incumbency is current and compliant is essential for it to remain useful.
Have you been asked for a Certificate of incumbency as part of an international transaction? Here we explain what this document is, its purpose and how to prepare one.
What is a Certificate of Incumbency?
Also known as a form of incumbency, a register of directors, a certificate of officers, and a secretary certificate, a certificate of incumbency is a legal document that lists a company’s directors, officers, and sometimes key shareholders. It is considered proof the people named are authorized to enter into legally binding transactions on the company’s behalf.
The most common use of a certificate of incumbency is when dealing with financial institutions, legal representatives, or other businesses, both at home and abroad. In simple terms, anyone who needs to verify a person is truly a director, officer, or shareholder of a particular company can do so by producing a valid incumbency certificate.
Information that might be featured in a certificate of incumbency includes:
- Company name
- Names, positions, and terms of office of directors, officers, and shareholders
- Name of the elected and/or acting secretary
- Name of any ultimate beneficial owners (UBO)
- Date of incorporation
- Registered address
- Business address (if different)
- Amount and currency of share capital
- Number of shares
- Sample signatures for each person named
Why Is a Certificate of Incumbency Important?
A certificate of incumbency is a vital tool to help smooth business operations while staying protected from criminal activity. Being able to legally prove who has a senior role in a company and who is authorized to take actions and make decisions protects against fraud, money laundering, and other financial crimes while generating valuable reassurances for parties seeking to deal legitimately with that company.
By having a single, trusted document that provides quick and easy verification of a company’s officers, essential transactions such as securing loans and opening accounts, buying and renting property, or applying for licenses and permits can be carried out smoothly and safely without the need for expensive and time-consuming legal checks.
Certificates of incumbency are routinely requested in loan and security agreements, the opening of corporate bank accounts, cross-border M&A and financing deals, the issuance or transfer of shares, and whenever legal opinions or closing deliverables demand formal verification of signing authority; without the certificate, counterparties have no documentary assurance that the person executing contracts or authorizing transactions on the company’s behalf is duly appointed and empowered under the corporation’s charter and bylaws.
Certificates of Incumbency are commonly required for business in various global financial hubs such as Hong Kong, Singapore, Jersey, the UK Virgin Islands and the Cayman Islands.
How to Obtain a Certificate of Incumbency
As an important and binding legal document, creating a certificate of incumbency is not as simple as typing it up and printing it out. Several requirements must be fulfilled to ensure the certificate can serve its purpose with the full protection of the law.
These include:
- Preparation: All information must be collected and verified to be correct and current.
- Drafting: The company secretary, who is the officer in charge of keeping company records, should draft the certificate.
- Legal wording: To be legally compliant, the document should include wording to the effect of: “The undersigned secretary of the company hereby attests that they are the elected and acting secretary of the company and are responsible for issuing and maintaining the records, minutes, and seal. Pursuant to the company’s articles of association, those listed below hold the position set forth opposite their names and the signature appearing opposite each such officer’s name is their true signature. The persons listed are authorized to act on behalf of the company to enter into legally binding and enforceable agreements and transactions.”
- Details: The document should then include each officer’s name, title, whether they are elected or appointed, and a sample signature for verification.
- Issuing: Once completed, agreed and authorized, the certificate of incumbency should be issued by the company secretary. The company seal should be incorporated into the document to prove its authenticity.
- Notarizing: If desired, the certificate of incumbency can be notarized by a public notary, but this is not a legal requirement. As an official corporate document, most third parties will accept the certificate as valid without additional notarization.
- Storage: Once complete, sealed, and signed, the certificate of incumbency should be placed on file with the company’s other important documents, such as its corporate articles, bylaws, resolutions, annual reports, and meeting minutes.
- Maintenance accuracy: While there is no legal expiry date to a certificate of incumbency, it is often requested that a presented document be less than three months old. The company secretary must ensure the certificate is updated after every change to the business affecting its contents. Failure to do so not only undermines the document but exposes the company to the risks it is intended to mitigate.
What Are the Legal Implications of a Certificate of Incumbency?
To fulfill its objectives as a legal document to aid a company’s business dealings, a certificate of incumbency should ensure it is compliant with all local, national, and international laws and regulations. When used to verify international transactions, particularly with countries that are members of the Hague Convention, this may require an additional document known as an apostille.
An apostille is a form of international authentication attached to a certificate of incumbency or other document, a kind of passport for the document. It proves the certificate satisfies international authenticity requirements and creates a smooth passage for business across borders.
Need a compliant certificate of incumbency? MSA can assist. Message →
Get Expert Advice on a Certificate of Incumbency
A certificate of incumbency is only useful when it is compliant with all laws and regulations in each territory it is used. While we have outlined the basic elements of this, navigating all legal complexities can be challenging for those who are inexperienced or lack expertise. To this end, any company seeking to employ a certificate of insolvency and other such documents should consider the services of an outside expert who can take responsibility and liability for the legal compliance of your company’s documents in every circumstance.
For assistance with these certificates and other corporate services, get in touch with MSA’s international transaction experts.
