written by | April 26, 2022

What Is a Common Seal and Common Seal of Company?

Despite your business strategy, one point is certain: each organisation will have a significant amount of paperwork to complete. A plethora of documentation will pass through the workstations of each company's office administrator and legal staff, including cards and gifts delivered to clientele to bills and sharing certificates. Seals from the organisation are essential instruments for the company to legitimise any paperwork appropriately.

Did you know?

In the UK, a company may have a company seal under the provisions of the Companies Act 2006 section 45. It may have further seals for other territories and for issuing securities. These seals have the additional legend of the territory or the word ‘securities’.

What Is a Common Seal?

The common seal is a metallic stamping used to imprint documentation with the firm's name to signify formal acceptance. The Corporations Act of 1956 and the Corporations Act of 2013 do not contain any definitions. According to the Institute of Company Secretaries of India's Secretarial Standards, a "common seal" refers to a firm's metallic stamp; a company can only use it with the board of directors' permission.  

The common seal is the firm's autograph on every record, and it commits the firm to all the commitments mentioned in the record. In other respects, the common seal is just the business's legal signatory, and every corporation must only have a single common seal stamp at the start of business. The company must use it in accordance with the Articles of Incorporation and the Corporations Act of 2013, respectively. Any documentation bearing the firm's mark and officially signed through an authorised representative of the firm becomes legally binding.

Approval

The committee must establish the common seal through a vote. The board of directors adopts the common seal at their very first meeting. And when the minutes of the meeting are published, they must have the common seal imprint.

Also Read: Difference Between Company vs Partnership Firm vs LLP

Form of content

According to the Companies Act of 1956, to make a company seal, they must use metals, and one must be able to operate it manually. However, as per the Corporations Act of 2013, there is no compulsion that they must use metals or some other substance while making the company seal. The company must also engrave the firm's name and the location of the registered headquarters in readable characters on the common seal.  

Authority

To fix the common seal stamp into any item, the company must use only the boards or a panel with the council's authorisation.

Why Is a Common Seal Required?

Most of us understand that a corporation, like an artificial entity, doesn't even have a substantial form; instead, it operates thru the board of directors to conduct all its operations and engage in numerous contracts. As a result, the firms use the common seal itself. The common seal is the firm's sign on almost any paper and commits the firm to any commitments assumed in the contract. According to the Corporations Act of 2013, a business must have a trademark from the time of its inception. Nevertheless, the Corporations Act of 2013 doesn't somehow specify the shape, way of attaching the common seal, or its possession, among other things. Due to this, the establishment of Secretarial Standard-8 (SS-8) by the Council of the Institute of Company Secretaries of India: "affixing of common seal" to reduce uncertainty and specify optimal and consistent practices regarding common seal.

Importance of Common Seal

The common seal offers various purposes and advantages whenever you're using it on a firm's documents. The key benefit is that even the documentation and contracts become entirely genuine and legitimate. Furthermore, the seal ensures that perhaps the paperwork is difficult to falsify. As a result, it prevents any fraud due to the rapid and simple fabrication of the supervisors' signatures. Furthermore, permission to use the mark in the workplace is only available to a select few employees. Technically, the company uses sealing to imprint a mark on the supporting documentation using molten wax, confirming it as the firm's legal transactions, though current seals usually merely make an incision or imprint on the sheet.

How Is the Common Seal Affixed?

A) The company must issue each certification underneath the firm's seal, according to Article 2(ii) of TABLE F – Articles of Association of a company limited by shares.

B) TABLE F's 79. I & (ii) and TABLE H's 30(i) & (ii) – (Articles of Association of a company limited by guarantee and not possessing share capital) state that the committee is responsible for the safekeeping of the company seal.

Whenever the company is fixing the seal on any of the instruments, there must be at least two of the board members present. After the process is over, these members must sign each instrument saying that it happened in their presence.

Documents on Which Common Seal Is Mandatory?

As per the Companies Act of 2013, a company must affix the following documentation with a common seal: a stake or equity certification. When the company is issuing the share certification, they have to seal and sign according to the rules and share certificate.

  • A power of attorney for the purpose of carrying out deeds;
  • A power of attorney allowing an individual for using the government’s legal seal overseas;
  • A power of attorney allowing an individual for using the government's legal seal overseas;
  • The issue of proxies tool by a corporation;
  • An investigator's evaluation according to Section 223 of the Companies Act 2013; in the case of a liquidation process, any documentation requested by the Liquidator.

However, a common seal formerly necessary for firms to issue certain approvals and affidavits on account of the firm under the Companies Act of 2013 has become voluntary now. The board member's signature is sufficient in place of the firm common seal. However, given the realities, the company seal is unavoidable. The authorised officers and the corporation have a legal responsibility to attach the common seal on all the mentioned documentation. According to the corporate article of association, the firm must do all these things.

Register and Custody of Common Seal

Each business should keep a register including documentation details upon which the firm's common seal is imprinted. And the company must keep it at the firm's corporate headquarters. The common seal can also be kept in any location which the board of directors approves. It is assigned under the protection of the company director, secretary, or any other individual the board of directors chooses.

How to Get a New Corporate Seal?

  • Go to an office supply shop in your area.
  • Create a corporate seal.
  • Select an embosser.
  • Invest in the company seal. (One has to purchase the firm common seal)

Also Read: What is a Small Company - Definition, Criteria, Examples

How Corporations Use Company Seals?

Charitable organisations, limited liability partnerships, limited liability partnerships, limited liability companies, legal entities, and C-corporations employ business seals to imprint paperwork and identify these as official company documentation.

For all the above, the business seal is frequently used to seal documentation like business decisions, property certifications, business agreements, and reports from regular conferences of shareholders and management or supervisors.

The stamp was initially employed in government papers to reflect the king's power in China. This history continues today, with the firm seal serving as a symbol of the corporation's legitimacy in numerous transactions.

Conclusion

In light of the preceding, the common seal is a must-have. The authorised officers and the firm have a constitutional responsibility to affix the seal, and it must complete so in line with the AOA of the firms.
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FAQs

Q: What is a common seal, and how does it work?

Ans:

Starting from 31st January 2017, a Malaysian firm's common seal is voluntary. Previous to this, each business must have a company seal as obliged by legislation. The company has to write the business name and identification on the stamp in readable Romanised characters. One can use the firm's common seal only with the directors' permission or in accordance with the act, regulations, and AOA. Two of the directors or a board member and a secretarial must sign the paperwork to affix the seal.

Q: How can a firm perform documentation as a deed without a common seal?

Ans:

A corporation may perform documentation as a deed without using a seal under section 128(1) of the Companies Act by performing it in compliance with section 127(3), getting it represented so that the business completes it as a deed, and submitting it as a transfer of property.

Q: Can firms preserve or accept and use existing common seals when the new company seal takes effect?

Ans:

Absolutely yes! Whether current or newly founded under the new company seal, firms have the option to preserve or accept while using their common seals, albeit this is no longer permitted.

Q: What should you do if a current firm with a common seal chooses not to keep its seal?

Ans:

The new seal and the organisation's (Sample Articles) notification (Cap. 622H) make no mention of every procedural requirement for a business to acquire or delete its common seal. The corporation decides on the processes for establishing or cancelling a company seal, considering the appropriate relating in its articles and the standard practice and procedures for establishing or abolishing a common seal.

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