In many deals on which we work, it has been customary to deliver certificates of officers. Sometimes the form of them is prescribed by a purchase agreement. Sometimes they are in support of an opinion. Sometimes they are required to bring down certain representations and warranties for closing.
Sometimes, however, they serve none of these functions. Sometimes we’re just giving them because it’s market to give them and it’s not worth a fight. And so we trudge off to compile articles, by-laws, authorizing resolutions and, worst of all, incumbency certificates for people who didn’t even sign anything on the deal, which adds more signatures and slows down the process. Then we swap ours with opposing counsel’s, making sure everyone signed everything correctly, and never look at them again.
If that sounds like a waste of time and fees, we are in agreement, so I had a chat with some of my colleagues about when an officer’s certificate is actually a useful document. Here’s what I found for appropriate times for an officer’s certificate:
- When it is in support of an opinion. Nobody likes giving legal opinions. They can cost an extra five figures to do (not a price quote) and they are rarely if ever relied upon for anything. But even when we are giving a legal opinion, we are not giving it without an officer’s certificate that we rely on for the facts of the situation, so if you want an opinion, we need an officer’s certificate. Or we could skip both.
- When the closing is happening after the signing of the purchase agreement. We’ve all agreed to a bunch of representations and warranties in the purchase agreement that we’re all happy with. So what happens if something has changed between last month when we signed and now when we’re closing? How do we know everything is still fine? We get folks to sign officer’s certificates saying all of the representations and warranties are still as true as they were at the time of signing.
- When we think there is some gap in our public searches. As part of our transaction, do you need to file articles of amendment or something similar? We may ask you to provide a certified copy of that document from an officer of your corporation for our benefit so that we don’t wait three days (or more) to get a certified copy from the ministry.
- When we didn’t negotiate it away in the purchase agreement. Now, if I had my way, prescribed officer’s certificates wouldn’t be making appearances in purchase agreements unless it was for one of the above points, which would render this point moot, but the reality is that sometimes they sneak in as a closing deliverable. If so, go ahead and deliver it, as you don’t want to be missing a condition to close, but feel free to grit your teeth while doing so.
I am sure I have missed one or two situation-specific items here, but that’s the main takeaway here is just that: these are situation specific. The general need for an officer’s certificate because it is “market” often ends up being a waste of time and paper, especially if there are sufficient representations and warranties in the purchase agreement, which should be your goal from the outset.
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