Incumbency Certificate: Understanding Its Uses & Benefits

An incumbency certificate is an official document consisting of crucial company information and the members of the management. The certificate with details like the names of board members, directors, company details, and members of management validates the authenticity of the business or corporation. It also acts as identity proof for the business owners and their position in the firm.Issued by the corporation or limited liability companies, the incumbency certificate is an important document required to run a business. Financial institutions will request you to show it as proof when you open a company bank account. It verifies your legal status in the company, and your decision-making power on behalf of the business. In this article, you will learn what is incumbency certificate, its importance, its use, and how to obtain one. Also read: Solvency Certificate: Meaning & How to Obtain a Solvency Certificate?

• Discovering what is incumbency certificate and its role in the company
• Learn about the certificate of incumbency meaning and who can issue it for the company
• What is included in the certificate and its legal standing
• The many uses of the incumbency certificate
• How to obtain a certificate of incumbency

A certificate of incumbency, also known as a secretary certificate, is a legal document that provides lawful recognition to the company’s primary members. Aside from mentioning details about the company’s CEO, president, corporate officers, and board members, it also authorises each member’s position in the business. The certificate helps you understand significant aspects of members in the company regarding their primary role, and whether they were appointed or elected for the same.Though there is no legal requisite for a third party to issue a certificate, a corporation usually uses a trusted independent source. It can be a company lawyer, a certified public accountant or a registration service that issues the certificate for the company and adds credibility to the name. The need for a document like a certificate of incumbency is to ensure legal compliance. For instance, the CEO of the company legally represents the business and in case of any malpractice within the firm, the CEO is responsible and answerable.

Unlike most formal company documents, there is no predefined format for a certificate of incumbency. As a business owner, if you want specific information in the certificate you have to explicitly ask your third-party source to include it. A standard certificate will have the date, company name, names of directors, and employees in prominent positions in the company. Usually next to names are signatures along with the identity of prime shareholders in the firm.The owner or managing director signs the certificate as a proof of verification for legally binding transactions. This signature is used to vet any verification of signature required during business operations. Here’s a breakdown of the format:

• Company name with an introduction about the firm, date of issue, and other relevant business details.
• Name of directors . Shareholders, elected and acting secretary along with their position in the firm. Alongside is space left for signatures.
• Details about the legal representative of the company and whether they were elected or appointed.
• Details of the secretary or legal firm filing the certificate, their signature and qualifications.

Once the certificate is issued, it is kept in the company’s minute book. A minute book contains important company bylaws, reports, corporate articles, and minutes from shareholder or board of director meetings. To sum it up in layman terms, a minute book consists of any legal and official document pertaining to the company. With any change of employees, the minute book is updated and used as a legitimate source holding up the accuracy of the documents it contains.

Example of the format

Though this format varies from business to business, here is what a standard certificate looks like:The signatory, Secretary (Name), of (Name) company, certifies the below:

1. He/she is elected for the position of Secretary of the company and is responsible for minutes, company seal, and business record keeping.
2. I legally certify that the people elected as per their names are elected in accordance with the company law. Their corresponding signatures are licit and original.

Name:Signature:Designation:

1. The person appointed for the above roles is in accordance with the company’s by-laws and under resolutions undertaken by the Board of Directors. The person will have legally binding authority to act on behalf of the company.
2. The person has authority to execute this document on behalf of the company from this (Time) and day (Date).

Signature:Name:Designation:Company Stamp Also read: Memorandum of Association: Objectives, Forms & Content of MOA

Wondering what is a certificate of incumbency used for? Well, the real purpose of a certificate of incumbency is to verify the legal authority or signing powers of an individual on behalf of the company. Usually, the certificate is used by a company whenever it sets new financial accounts; however, the document plays two more roles:

Legal advice

If your company requires any legal counsel, the law firm will ask for a verification of the people working. It is often the core employees of the firm, who have legal signing authority on behalf of the company. In case, a contract of acquisition is drawn up, the certificate of incumbency allows your lawyer to legally bind the official certificate signatory to the contract. A second scenario where a corporate lawyer makes decisions and transactions on the company’s behalf needs to know who to share classified information with. A member of the company, who is also a signatory on the certificate is a verified source.

International deals

If your company decides to do business with an overseas client, a notarised incumbency certificate has to be sent also with other documents. It helps both you and your client verify identities and ensure there is no breach of trust. With everything sealed and legally binding, the certificate smoothens oversea deals and transactions, especially when they are made virtually.Here are some other reasons your company needs one:

• Opening a bank account
• Applying for a company loan
• Applying for public subsidy from the government
• Applying for business visa for employees or legal representative of the company

A certificate of incumbency means an official document forms an integral part of any business. It not only helps you verify yourself in the market but also keeps your business running smoothly. Here’s why:

• The certificate is required for all employees, members of the board, and stakeholders who are part of the company’s legal decision-making process.
• It validates the position and names of select important individuals who can be held accountable in the company.
• You will need the certificate if you want to open a new bank account or process a new financial transaction for the company.
• The certificate plays a crucial role during company mergers, especially when the executive board undergoes restructuring.
• Most financial and legal decisions taken for the company require a certificate of incumbency as proof.

Getting a certificate of incumbency is easy if you follow the procedure.

1. You will need to first create a draft of the certificate and might have to get it notarised, as per the latest company laws. Only a corporate secretary can issue the certificate.
2. File the certificate with the state secretary’s office.
3. Create a minute book and file the certificate with other records.

If there is any change in the company’s managerial position, for instance a director who retires or leaves, the certificate must be revised. The updated certificate will replace the old one in the minute book. Also read: What is an Udyam or MSME Certificate?

A certificate of incumbency is more than just a company document kept in the dark archives with other files. The certificate pertains to the legal status of the company and helps verify the officers who play a crucial role in the legal activities of the firm. Limited liability companies and corporate organisations must issue the certificate, file it in the minute book, and ensure it stays updated.