Corporate bank accounts - Confidus Solutions

Posted by Cynthia Smith on March 20th, 2021

If you operate your own company, then no matter what field you are in or what type of business you run — limited liability company, corporation or sole proprietorship — you will almost certainly need a bank account to keep your personal income separate from your business income. Business bank accounts have different features depending on the legal structure of the business and other preferences.

Traditionally, a corporate bank account has the most formal requirements. Corporations exist as distinct legal entities, separate from their owners, and have similar rights to individuals — they can incur liabilities, own assets, conduct business, sign contracts and open bank accounts. The only difference is that a corporation is not a natural person; therefore, it must authorise one or more individuals to manage its bank account on its behalf.

Opening a corporate bank account

In order to distinguish a corporate bank account from other types of business accounts, it is useful to look at the requirements for opening a corporate account. The key feature of a corporate bank account is that it can only be opened by the decision of the board of directors. In contrast, a regular business bank account can be opened by an owner or another person without a vote being held, as long as that person has the authority to sign the paperwork. Typically, a corporate bank account is opened by the treasurer of the board of directors after a corporate resolution is brought forward authorising him or her to carry out this task.

Documents required for opening a corporate bank account

Opening a corporate bank account is a straightforward and relatively simple procedure; however, you need to take into account all of the bank’s stipulations and required documents, which may vary significantly from country to country. However, there is a certain set of documents that forms an integral part of the process of opening a corporate bank account and will undoubtedly be required regardless of the bank. These are the most commonly required documents:

• Completed corporate bank account application form, signed by the authorised signatories in accordance with the board resolution
• An extract of the board resolution approving the opening of the corporate bank account
• Documents that confirm the authority to open and manage the company’s bank account — e.g. a board resolution, a power of attorney, an extract from the commercial register, etc.
• An original or a certified true copy of the company’s incorporation documents, i.e. the certificate of incorporation, articles of association and by-laws
• Identification documents for the company’s directors, principal shareholders and authorised signatories — this list may be extended to the beneficial owners of corporate shares
• Specimen signatures of the authorised signatories

Other documents may be required depending on the country and state regulations regarding risk factors and compliance requirements. These may include a director declaration providing personal information on directors and principal shareholders (a person entitled to exercise 10% or more of the shareholders’ voting rights), a business plan or audited financial statement as a proof of business, a certified copy of an organisational chart showing each individual shareholder’s percentage of holding and details of the ultimate beneficial owners for nominee shareholders.

Opening a corporate account in the EU as a non-resident

Businesses not resident in the EU that wish to open a corporate bank account may face a longer procedure, additional requirements and stronger risk and compliance checks, including KYC ('know your client'). Although the requirements for non-EU residents differ significantly from country to country as well as from bank to bank, any reputable bank will require the professional and personal details of the owner of the company. Like EU-resident companies, those registered outside of the EU are highly likely to be required to submit proof of the company owner’s residential address. Proof of residence is needed in order to confirm that neither the corporation nor its owners are residents of a country that is currently the subject of an international embargo or other restrictions.

Corporate banking

Corporate banking is a set of services custom-tailored for corporations. Traditionally, corporate banking has always been a key profit centre for most banks. However, since corporate clients are the biggest generators of loan demand, it is also one of the biggest sources of risk. Services commonly offered to corporations include loans and other credit products (typically the biggest business area within corporate banking), treasury and cash management services (managing the working capital of the business), commercial real estate (portfolio evaluation, real asset analysis and debt and equity structuring) and other services such as equipment loans, trade finance and employer services.

Often, commercial banks offer their corporate clients services related to investment banking, such as securities underwriters and asset management. Interestingly, corporate banking and investment banking were not distinguished as two separate fields of banking up until 1933, when they were separated out in the US by the Glass-Steagall Act.