Gavin Howe
A common-law seal, also known as a company or corporate seal, is a way to ensure that a document is authentic and important. It is a type of legal company signature that is affixed to documents and agreements to show that they have been approved officially. Seals can be made of wax, metal, or a special sticker, and they often include the company's name, the year it was incorporated, and the state of incorporation. They are used to authenticate or certify documents, particularly in global business transactions, as many countries do not recognize legal contracts that do not include an official company seal. The use of seals dates back thousands of years, but their usage has been gradually declining in modern times due to statutory reforms and advancements in technology.
| Characteristics | Values |
|---|---|
| Purpose | To ensure a document is real and important, and to make contracts legally recognized in foreign nations |
| Types | Corporate seal, notary seal, great seal, private seal, wax seal, wafer seal, word or initials, adhesive paper seal, metallic seal, rubber stamp |
| Usage | Used to authenticate or certify documents and instruments, and to prove their authenticity |
| Requirements | Must be made of metal and capable of manual operation, contain the name and the state in which its registered office is situated, be adopted by a board resolution, be stored in a safe and secure place, be used only with the approval of the company's board of directors, be used in the presence of the managing director or two directors and the company secretary or any other person as the board may authorize |
| Optionality | Not always required, but used by many companies |
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What You'll Learn
History of common law seals
A common-law seal, also known as a company or corporate seal, is a device used to authenticate or certify documents and instruments, and to prove their authenticity. Seals were historically made with wax embossed with an imprint, with their use dating back thousands of years.
In the courts of common law jurisdictions, a contract which was sealed ("made under seal") was treated differently from other written contracts ("made under hand"). This practice gradually fell out of favour in most jurisdictions in the 19th and early 20th centuries. Originally, only a wax seal was accepted as a seal by the courts, but by the 19th century, many jurisdictions had relaxed the definition to include an impression in the paper, an embossed paper wafer affixed to an instrument, a scroll made with a pen, or the printed words "Seal" or "L.S." (locus sigilli, meaning "place of the seal").
With regard to companies and other corporate bodies, the common law originally required that all contracts made by such a body had to be made under seal, whether they were deeds or not. This rule was gradually eroded, for example, being abolished in respect of companies by the Companies Acts in the first half of the twentieth century, and for other corporations by the Corporate Bodies' Contracts Act in 1960.
In the modern era, company seals are made with a machine that has an upper and lower die that creates an imprint when pressed together tightly. This can be done directly on paper or with red adhesive seals that imitate the traditional wax seals. While it is not required for a business to have its own corporate seal, it can sometimes be useful to create one, particularly for companies with overseas clients, as many countries do not recognize legal contracts that do not include an official company seal.
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Types of common law seals
A common-law seal is a device for making an impression in wax, clay, paper, or another medium to authenticate a document or to prevent interference with a package or envelope. It is a way to make sure a document is genuine and important.
Historically, under common law, a seal could replace the consideration given in a contract. Contracts under seal are theoretically more enforceable than those without. However, laws vary from state to state, and there may be no legal difference between sealed and unsealed contracts.
The legal term "seal" comes from the wax seal used for authentication throughout history. Originally, only a wax seal was accepted by the courts, but by the 19th century, many jurisdictions had expanded their definition to include impressions in paper, embossed paper wafers, scrolls made with a pen, or the printed words "Seal" or "L.S." (locus sigilli, meaning "place of the seal" in Latin).
In England and Wales, the common law courts originally only recognised wax seals, but this requirement was gradually relaxed. By the 20th century, a small circle of red adhesive paper affixed to a document was sufficient when an individual had to use a seal.
In some jurisdictions, such as Canada, it is a legal requirement for a professional engineer to seal documents.
In East Asia, seals are commonly used instead of handwritten signatures to authenticate official documents or financial transactions.
There are several types of common law seals:
- Corporate seal: Used by a corporation to execute and authenticate its corporate and legal instruments.
- Notary seal: Used by a notary public to certify documents.
- Great seal: The official seal of the United States or a particular state.
- Private seal: A corporate or individual seal, distinguished from a public seal.
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How to use a common law seal
A common law seal is a way to ensure a document is authentic and important. It is a device or substance that joins two things, usually making the seam impervious. It can be a piece of wax, a wafer, or some other substance affixed to the paper or other material on which a promise, release, or conveyance is written.
Historically, a wax seal with an engraved signet ring was used to identify its owner, providing evidence that the owner of the seal was party to the contract. This practice gradually fell out of favour in most jurisdictions in the 19th and early 20th centuries. By the 20th century, a small circle of red adhesive paper affixed to the document was sufficient when an individual had to use a seal, although a circle containing the letters "L.S." was also considered adequate.
In the case of companies, the common law originally required that all contracts made by such a body had to be made under seal, whether they were deeds or not. This rule was gradually eroded, for example, being abolished in respect of companies by the Companies Acts in the first half of the twentieth century. The Companies Act 1989 removed the requirement for a company to have a common seal, and made provision for those documents that had previously needed to be executed under seal, such as deeds, to instead be executed by officers of the company.
However, companies can still have and continue to use seals to execute deeds if they wish, in which case the seal has to be engraved and bear the name of the company. Some other corporations that are not companies registered under the Companies Acts are still required to have and use seals, such as the Royal College of Nursing and the BBC.
A common seal is also referred to as a company seal or corporate seal and is a rubber stamp carrying the words "common seal" with the company's name, ACN, and ABN. It is equivalent to a person's signature and should be stored in a safe and secure place.
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Legality of common law seals
A common-law seal is a way to authenticate a document and ensure its legitimacy. It is usually in the form of a wax seal, a wafer, or a special sticker affixed to the document, though it can also be a set of special words or initials. In the past, only a wax seal was accepted by courts, but over time, this requirement was relaxed to include other forms, such as an impression on the paper or an embossed paper wafer.
The use of common-law seals has evolved over time, and while they were once widely recognised by courts in common law jurisdictions, they are no longer a mandatory requirement in many places. In the context of companies and corporate bodies, the common law originally required that all contracts made by such entities be made under seal. However, this rule has been gradually replaced or abolished by various Acts, such as the Companies Acts in the first half of the twentieth century and the Corporate Bodies' Contracts Act 1960.
Today, the use of common seals by companies is typically optional, and the requirement to use them depends on the company's constitution and the laws of the country in which it operates. For example, in Australia, the Company Law Review Act 1988 removed the legal requirement for companies to use common seals, but companies with constitutions established before 1988 may still need to use them. Similarly, in India, the Companies Act, 2013, does not define or mandate the use of common seals, but the Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI) recommend their use with specific guidelines.
Despite the varying legal requirements, many companies continue to use common seals due to their perceived benefits. Seals can add legitimacy to documents, especially when dealing with overseas clients or transactions, as some countries still legally require seals on contracts. Additionally, seals can reduce the number of required signatories and enhance the security of documents by making them more difficult to alter.
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Benefits of using a common law seal
A common-law seal is a device or substance that joins two things, making the seam impervious. It is used to secure or prove the authenticity of a document. It can be a piece of wax, a wafer, or some other substance affixed to the paper or other material on which a promise, release, or conveyance is written. The use of a seal is a legal formality that serves as evidence of the existence of a contract.
Historically, only wax seals were accepted by the courts, but by the 19th century, many jurisdictions had expanded their definition of a seal to include an impression in the paper, an embossed paper wafer affixed to an instrument, a scroll made with a pen, or the printed word "seal" or "L.S." (locus sigilli, meaning "place of the seal").
- Authenticity and Security: A common-law seal serves as a form of authentication, ensuring the document's authenticity and security. It proves that the document is real, important, and has not been altered.
- Legal Significance: In common law jurisdictions, a contract under seal ("made under seal") is treated differently from other written contracts ("made under hand"). A seal may also extend the statute of limitations within which the contract may be enforced.
- Evidence of a Contract: The act of affixing a seal to a document is evidence of the existence of a contract and the intention to be bound by its terms.
- Removal of Consideration Requirement: In classical contract theory, a seal was recognised as removing the need for consideration (value) in a contract. While this has changed with modern statutory reforms, the use of a seal may still raise a presumption of consideration.
- Legitimacy and Validity: Particularly in international contexts, the use of a common seal may add legitimacy and validity to a document. It can provide reassurance to parties who are unfamiliar with the local legal requirements for document execution.
- Company Requirements: In some cases, companies are still required to use common seals. For example, corporations that are not registered under the Companies Acts, such as the Royal College of Nursing and the BBC, must use seals when executing deeds. Additionally, companies with constitutions established before 1988 may still need to use common seals.
While the use of common-law seals has evolved and is no longer mandatory in many jurisdictions, it continues to offer benefits in terms of document security, authenticity, and legal significance.
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Frequently asked questions
A common law seal is a way to make sure a document is real and important. It is the company’s signature to a document that is affixed and binds the company to all obligations undertaken.
Seals were historically made with wax embossed with an imprint. Today, company seals are made with a machine that has an upper and lower die that creates an imprint when pressed together. This can be done directly on paper or with red adhesive seals that imitate the wax seals of the past. In some places, the common seal is a rubber stamp.
A common law seal can be used by companies, corporate bodies, and individuals. In some countries, the use of a seal is legally required. In others, it is optional.
