Existence: Overview, definition, and example
What is existence?
Existence refers to the state of being present, functioning, or legally recognized. In a business context, existence refers to the legal status of a company, confirming that it is formally established and recognized under the laws of its jurisdiction. This includes being properly incorporated, having the necessary permits, and being in good standing with regulatory authorities.
For example, a corporation's existence is confirmed when it is registered with the appropriate governmental agency, such as the Secretary of State in the U.S., and has filed the required documentation.
Why is existence important?
Existence is important because it establishes a company’s legal capacity to enter into contracts, own property, and conduct business operations. Without recognized existence, a business cannot engage in legal agreements, sue or be sued, or enjoy the benefits and protections provided by law.
For businesses, confirming existence is crucial for legitimacy, financial transactions, and regulatory compliance. It ensures that the company can operate within the legal framework and is accountable for its actions.
Understanding existence through an example
Imagine a business applying for a bank loan. The bank will require proof of the company’s existence, such as a certificate of incorporation or registration, to confirm that the business is legally recognized and able to take on debt.
In another example, a foreign company looking to do business in a new country must prove its existence by providing documentation that shows it is legally registered and in good standing in its home country before it can expand operations or enter into agreements in the new country.
An example of an existence clause
Here’s how an existence clause might look in a contract:
“The Company represents and warrants that it is a corporation duly organized, validly existing, and in good standing under the laws of [Insert Jurisdiction]. The Company has the requisite authority to enter into this Agreement and perform its obligations hereunder.”
Conclusion
Existence is a fundamental concept that confirms a business’s legal recognition and ability to operate. It ensures that the company is officially established and compliant with applicable laws.
By including existence clauses in agreements, businesses can confirm their legal status, ensuring that all parties understand the company's authority to enter into and fulfill contractual obligations.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.