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What Is An Incumbency (Overview: All You Need To Know)

Wondering What Is An Incumbency?

What does incumbency mean?

What are the essential elements you should know!

Keep reading as I have gathered exactly the information that you need!

Let’s understand what is the meaning of incumbency and how it works!!

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What Is An Incumbency

What is the meaning of incumbency?

You may have heard of a “certificate of incumbency” or an “incumbent” and wonder what it means exactly.

The term incumbent is used in business and politics to refer to a person holding a position of power or authority.

In business, the term incumbent or incumbency is used to refer to someone who has the power, ability, authorization to act on behalf of a company.

You can also have the “incumbent” refer to a company that holds the largest market share in a particular industry or sector (the market leader).

For example, Amazon is an incumbent within the e-commerce segment as a result of its dominant position.

To better understand what an “incumbency” means, let’s first understand its definition.

Incumbency Meaning

According to the Merriam-Webster dictionary, the word incumbency is defined as follows:

The sphere of action or period of office of an incumbent
Author

In other words, incumbency means the sphere of authority or the period an incumbent has authority.

In the business world, when we talk about an incumbent, we may be referring to a person holding a position of power within an organization.

For example, the Chief Executive Officer of a company is sometimes referred to as the incumbent as he or she holds a high level of authority in a company.

Certificate of Incumbency 

You may have also heard of “certificate of incumbency” or “incumbency certificate”.

What is a certificate of incumbency?

A certificate of incumbency refers to a document issued by a company or legal entity confirming the name, role, and authority of a person within the organization.

Typically, you will see the confirmation of a person’s name, his or her title within the company, along with a sample of the person’s signature. 

You may also have some certificates that will provide some description of the person’s sphere of authority within the company.

For example, the certificate of incumbency can confirm something like:

  • Name: John Smith
  • Title: Chief Executive Officer 
  • Sample signature 

In some cases, the corporate seal may be affixed on the certificate or even be notarized by a notary public. 

Depending on where you are, there may be a different name of a certificate of incumbency, such as:

  • Certificate of officers
  • Secretary certificate
  • Certificate of directors 

It may be useful for banks, financial institutions, contracting parties, and other stakeholders to demand a certificate of incumbency from a company to ensure that the party signing on behalf of the company has the necessary power and authority to sign the contract or document.

Incumbency In Business

In business, incumbency refers to either someone having authority within an organization or a company dominating a certain industry, sector, or market.

For example, if you want to refer to the leading company within an industry, you can refer to that company as the incumbent (being in an incumbency position).

The largest company in the oil and gas can be referred to as the incumbent, the largest pharmaceutical, the largest retail, the largest e-commerce etc.

Typically, the incumbent corporation has the largest market share in the segment, enjoys a good reputation, is well-known, and trusted.

You can also talk about an incumbent by referring to an individual. 

If a person acts as the Chief Financial Officer, Chief Operating Officer, Chief Legal Officer, or any other C-Suite type of position, you can say that he or she is the incumbent.

The incumbent is the person who is currently holding the position of CFO, COO, CLO, etc.

Incumbency In Politics

The term incumbency is also relevant in politics.

When you refer to an incumbent in politics, you are referring to a person who is holding an official position.

For example, you can have any public office referred to as the incumbent such as the mayor as the president, the governor, or any other public office position.

The incumbent official is the person who is the current holder of an office.

When the time comes for the elections, the candidates running for office strive to unseat the incumbent officeholder.

Incumbency Advantage

What is an incumbency advantage?

The incumbency advantage or incumbent advantage refers to the favorable position held by a person holding power or a company dominating an industry.

When you hold a position of power, you have an advantage over your competitors allowing you to achieve a dominating position.

For example, a company that is an incumbent within an industry (the industry leader) has an advantage over its competitors as it enjoys brand recognition, it may have superior products and services, and it may have more experience and know-how.

Similarly, if a person is an incumbent holding a particular position within a company or in public office, it will be easier for the incumbent to keep his or her position than for a newcomer to dethrone the incumbent.

The advantage of an incumbent over its competitors is referred to as the incumbency advantage.

Definition of Incumbency Takeaways 

So there you have it folks!

What is “incumbency”?

What is the meaning of incumbency in business?

In essence, the term incumbency refers to a person holding a certain position or a company holding a certain position in the market.

In the business context, you may say that a company incumbent can be an executive of some kind.

In other words, the person holding the position of president or CEO can be an incumbent, vice-president, or other high-ranking member of a company.

Another term that you may have also heard of is the incumbency certificate.

The incumbency certificate is a legal document issued by a company, corporation, or any form of corporate entity (such as a limited liability company or other) confirming the name, position and other relevant information about the position of its directors, officers, and sometimes key shareholders.

Typically, the certificate of incumbency will indicate who holds what position within a given company.

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I have worked in an international financial institution dealing with the stock market, stock, bonds, corporate financing, and securities.

I practiced law in private practice where I advised and consulted entrepreneurs and business owners on many aspects of their business, such as how to start new business ventures, how to scale their business, how to navigate commercial contracts, and how to set themselves up for success. 

I also acted as an in-house counsel and eventually as the General Counsel in a rapidly growing technology company going through hypergrowth, dealing with international Fortune 500 clients, and operating internationally. 

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Now, let’s look at a summary of our findings.

What Is An Incumbency

  • Incumbency is the position held by someone in power or someone having authority 
  • In relation to companies and business organizations, incumbency (or an incumbent company) is one that is the market leader or the one holding the largest market share within an industry 
  • In relation to politics, incumbency refers to a position of power in public offices like the president’s office, mayor, governor, congressperson, or other
  • Incumbency may also be used to refer to a certificate of incumbency which is a legal document issued by a company to establish the name and position of its directors, officers, and key personnel
Articles of incorporation 
Attestation 
Authorized signatory 
Bylaws meaning
Certificate of existence
Certificate of good standing 
Certification meaning 
Commercial transaction 
Corporate governance
Corporate resolution
Fiduciary duty 
Financial power of attorney
General power of attorney
Incumbency certificate 
LLC vs S Corporation 
Locus Sigilli
Minute book
Notary public 
Power of Attorney
Property deed
Shareholder ledger
Stock ledger
Shareholder resolution 
Signing officer
Special power of attorney
Author
Board member definition
Chief executive officer definition
Chief financial officer definition
Chief legal officer definition
Chief marketing officer definition
Company manager definition
Competitor definition
Corporate adviser definition
Creditor definition
Customer definition
Distributor definition
Employee definition
External stakeholder definition
Internal stakeholder definition
Investor definition
Labor union definition 
President definition
Shareholder activists definition
Shareholder definition
Supplier definition
Vice president definition
Author
Editorial Staff
Hello Nation! I'm a lawyer by trade and an entrepreneur by spirit. I'm passionate about law, business, marketing and technology. On this blog, I share my experiences, provide you with golden nuggets of information about business, law, marketing and technology. Enjoy!

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