If you have applied for a loan with your corporation as the borrower, you may have heard the term “Delaware Certificate of Incumbency”. What is a Delaware Certificate of Incumbency and when do you need one?
What Is a Delaware Certificate of Incumbency?
A Delaware Certificate of Incumbency is a document signed by an officer of a corporation that identifies the current officers and directors of the corporation. This Certificate may also list the current shareholders.
Overtime, corporations and LLC often reorganize or restructure their management. While lenders may ask for organizational documents of the company that state who was in charge at the beginning, the lender also wants to know who is in charge now. The Certificate of Incumbency explains what has changed since the entity was initially organized.
The Delaware Certificate of Incumbency differs from corporate minutes, Unanimous Actions of the Directors, and bylaws. It is an internal statement of the corporate officer representing a snapshot in time to express what individuals currently are held-out with authority of an officer to act.
A Certificate of Incumbency is not a Certificate of Status or Certificate of Good Standing. It has nothing to do with whether a company is duly incorporated or whether its franchise taxes and annual reports have been filed.
The Secretary or President of the Corporation signs the Certificate of Incumbency. Sometimes it is notarized, verifying the signature authenticity and allowing the document to be recorded in a public record.
When Do I Need a Certificate of Incumbency?
A Certificate of Incumbency is often requested when establishing a bank account, obtaining financing from a lender, selling all stock or assets, or engaging in large business transactions.
This is a private legal document not filed with the state of incorporation. It is prepared by the corporation or a lawyer. It is executed by an authorized Officer. Limited Liability Companies may also be asked to produce this document. An LLC manager or officer signs a Certificate of Incumbency. It is a snapshot in time expressing what natural persons or entities currently are the officers, managers and members of the LLC. Similarly, it is a snapshot in time of who the officers and directors of the corporation are.