Corporate officers should be given the authority to make binding decisions.

What you’ll discover:

What exactly is a Certificate of Occupancy?
When is a Certificate of Incumbency required for a corporate officer?
What happens if a corporate officer executes a contract on behalf of the firm without first obtaining a Certificate of Incumbency?
With a correctly designed Certificate of Incumbency, you may eliminate doubt.

CEOs and other high-ranking officials often make critical, legally enforceable decisions on behalf of their organizations. It may be impossible for the CEO or president to personally sign off on these choices, depending on the size of the firm and its geographical spread. So how does the opposite party know that the person making a legally binding corporate decision has such authority?

The Certificate of Incumbency comes into play here. The Certificate of Incumbency, also known as a “register of directors” or “certificate of officers,” is a signed, legal document that verifies the identities of those authorized to act on behalf of the organization. We’ll address some of your queries concerning this vital business document.

What exactly is a Certificate of Occupancy?

The secretary of a corporation or limited liability company (LLC) issues a Certificate of Incumbency, which lists the names, titles, and terms (if elected) of directors and officials. Depending on their function within the organization, shareholders may also be included to this document on occasion. The president, chief executive officer (CEO), chief operating officer (COO), chief financial officer (CFO), and vice presidents or other upper-level managers are usually on this list.

A comparable signature may also be appended to each of the listed officials, allowing other parties to compare signatures and confirm the officer’s authorization to sign.

Corporations and limited liability companies (LLCs) commonly create a Certificate of Incumbency when they incorporate, but it must also be amended as required to account for the addition or departure of officers. A Certificate of Incumbency’s credibility can be confirmed through notarization, but the official company seal and the signature of the officer responsible for maintaining corporate records (the “secretary,” either in title or practice) are usually sufficient to establish legitimacy with third parties.

Since that some organizations have a global reach and executives may sign binding agreements in many countries, it’s critical to realize that the Certificate of Incumbency is controlled by the laws of the state in which the firm is formed.

When is a Certificate of Incumbency required for a corporate officer?

Assume your newly appointed CFO goes to a business partner to assess and sign off on a long-awaited distribution contract. She has business cards and introduces herself as your company’s new finance head, but the other party requires guarantees. It’s a significant deal for both corporations, and neither wants to take any risks.

They may establish her identity and authority while also confirming that her signatures match by providing her with an updated Certificate of Incumbency.

Before creating an account or authorizing a major transaction, financial institutions may seek a Certificate of Incumbency. Lawyers may also require this document to confirm which officials have legal authority to bind the corporation in a certain contract. It may also be used to validate the contents of the company’s Meeting Minutes. A Certificate of Incumbency may be requested by any party engaged in a transaction or legal arrangement with the corporation.

What happens if a corporate officer executes a contract on behalf of the firm without first obtaining a Certificate of Incumbency?

Some instances, such as transactions with foreign banks and submitting corporation taxes, would need a Certificate of Incumbency from another party prior to a company official signing and completing a transaction. But, if you conduct a transaction on behalf of your firm without producing a Certificate of Incumbency, there is no penalty, presuming the other party did not need it.

The danger of not obtaining a Certificate of Incumbency while doing business with other companies and LLCs is that your agreement may not be legally enforceable if it is discovered that the individual signing was not authorized to do so.

With a correctly designed Certificate of Incumbency, you may eliminate doubt.

The most successful companies recognize the value of delegating. Even though you are the founder and CEO, you cannot be everywhere at once and must rely on other officials to make key decisions on your behalf. Make things easy on yourself by using a well-drafted Certificate of Incumbency, and make sure to modify it as needed. If you have any legal issues regarding this or any other business subject, please contact a lawyer.