Keith Mack
A common seal, also known as a company seal or corporate seal, is an official seal used by a company to authenticate and execute legal documents. It is the company's signature and is affixed to documents and agreements that the company enters into with other parties. The common seal is typically made of metal and is affixed only with the approval of the company's board of directors. It is not mandatory for a company to have a common seal, but it is considered indispensable for authenticating documents and preventing forgery. The use and adoption of a common seal are governed by the relevant company law in the jurisdiction, such as the Companies Act in India and the UK.
| Characteristics | Values |
|---|---|
| Definition | An official seal used by a corporate body for the purposes of authenticating and executing legal documents |
| Use | To be affixed to documents with the approval of the company's board of directors |
| Composition | Metallic |
| Function | The signature of the company |
| Legal Obligation | Creates a legal obligation for the authorised officials and the company to the acts and duties mentioned in the document |
| Mandatory | Not mandatory but indispensable |
| Maintenance | A register containing particulars of documents on which the common seal is affixed should be maintained at the company's registered office |
| Custody | Kept in the custody of a director, company secretary, or any other official authorised by the Board |
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What You'll Learn
Definition of a common seal
A common seal is an official company seal, used as a signature by a company when entering into agreements with other parties. It is a metallic seal with the company's name and the state in which the registered office is situated engraved in legible characters. The seal is affixed to documents, contracts, deeds, and other legal instruments, and is seen as authoritative and authentic.
The use of a common seal is not mandatory, but it is considered indispensable by many companies. It is typically adopted by a resolution of the Board during the first board meeting and is affixed only with the approval of the company's board of directors. The common seal is usually made of metal and capable of manual operation, though the specific material is not specified.
The primary importance of a common seal is its ability to authenticate documents and prevent forgery. It is authorised for use by a limited number of company employees, reducing the risk of fraud that may arise from the easy forgery of managers' signatures.
The common seal is often used in conjunction with the signature of an authorised official of the company, and the affixing of the seal creates a legal obligation for the company and the authorised officials. The use of the seal is governed by the company's Articles of Association and relevant company laws, such as the Companies Act, 2013 in India.
The common seal register is maintained at the company's registered office and contains particulars of the documents on which the seal has been affixed, including descriptions, dates, and names of attesting persons.
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Use cases
A common seal is an official company signature, used to authenticate and execute legal documents such as contracts, deeds and share certificates.
The common seal is used to stamp or emboss a company's legal name on official documents. This is done in the presence of the managing director or two directors and the company secretary or any other person authorised by the board. The common seal is affixed to documents only with the approval of the company's board of directors, and each usage is recorded in a register. This register is kept at the company's registered office and contains details such as the description of the document, the date and number of the resolution authorising the use of the seal, and the name of the person who attested the affixation.
The common seal is particularly useful for companies operating in multiple territories, as it can be used to authenticate documents in different locations. For example, a company operating in China would use a 'company chop' as its common seal, which takes the form of a circular stamp. In Singapore, a company chop is also essential.
The common seal is not a mandatory requirement for companies, but it is considered indispensable for authenticating documents and preventing fraud. When the common seal is affixed to a document, it creates a legal obligation for the company and the authorised officials to carry out the acts and duties mentioned in the document.
In summary, the common seal is used as a form of signature by companies to officially approve documents and agreements. It serves as a protection against forgery and provides authenticity and authority to company documents.
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Benefits
A common seal is an official company seal, often made of metal, which is used to authenticate and execute legal documents such as contracts or deeds. Although it is not mandatory, it is considered indispensable by many companies.
The common seal has several benefits for companies:
- Authentication and Authority: The seal acts as the official signature of the company, providing authentication and authority to legal documents. It signifies that the document is the act and deed of the company itself, rather than an act carried out on behalf of the company by its agents. This makes the agreements, documents, or deeds entirely authoritative and authentic.
- Fraud Prevention: The common seal helps prevent forgery and averts fraud cases. As it is authorised for use by a limited number of company employees, it is more secure than a manager's or director's signature, which can be easily forged.
- Legal Obligation: Upon affixing the common seal, a legal obligation is created. The authorised officials and the company become responsible for the acts and duties mentioned in the document. This provides clarity and accountability in legal agreements.
- Protection Against Forgery: In some countries, the use of a company seal is seen as a means of protection against forgery. For example, in China, company chops (the Chinese version of a company seal) are mandatory, and forgery of company seals is a criminal offence.
- Compliance and Record-Keeping: The use of a common seal helps companies comply with legal requirements and maintain proper records. Companies are required to maintain a register containing particulars of documents on which the seal has been affixed, including descriptions of the documents, dates, and authorising resolutions. This promotes transparency and good governance within the company.
- International Recognition: The use of company seals is recognised internationally, particularly in common law jurisdictions. For companies operating in multiple territories, having a common seal can facilitate transactions and agreements across different legal systems.
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Requirements
A common seal is the official signature of a company, affixed to documents and agreements that the company enters into with other parties. While it is not mandatory, it is considered indispensable as it authenticates and executes legal documents, making them binding on the company.
A common seal is typically required to be made of metal and capable of manual operation, although modern seals will usually only leave an indentation or impression on the paper. In some cases, a red wafer may be used to imitate old red wax seals and improve visibility on photocopies. The seal should include the company's name and the state in which its registered office is located, engraved in legible characters.
The common seal should be adopted by a resolution of the Board, generally during the first board meeting, and its impression should be included in the minutes of that meeting. The seal must be affixed with the approval of the company's board of directors, in the presence of the managing director or two directors, and the company secretary or any other authorised person.
The persons in whose presence the seal is affixed must sign every instrument to which the seal is affixed. Additionally, companies are required to maintain a register containing particulars of documents on which the common seal has been affixed. This register should be kept at the company's registered office and include the following information:
- Description of the document
- Date and number of the resolution authorising the affixation of the common seal
- Date of affixing the seal on the document
- Name(s) of person(s) who attested the affixation
- Place at which the document was sealed
The common seal must be kept in the custody of a director, company secretary, or any other official authorised by the Board.
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Adoption
A common seal is an official company seal, used to authenticate and execute legal documents, such as contracts or deeds. It is the signature of a company, affixed to documents and agreements that the company enters into with other parties.
The use of a common seal is not mandatory, but it is considered indispensable by many companies. The Companies Act, 2013, does not define a common seal or specify the material from which it should be made, but Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI) state that it should be made of metal and capable of manual operation. The common seal should be adopted by a Board resolution, generally during the company's first board meeting, and it should be used in accordance with the Articles of Association of the Company and the Companies Act, 2013.
The common seal is affixed only with the approval of the company's board of directors and in the presence of the managing director or two directors and the company secretary or any other person authorised by the Board. The persons in whose presence the common seal is affixed must sign every instrument to which the seal is affixed. The common seal has various uses and benefits, including adding authority and authenticity to agreements, documents, or deeds, and preventing fraud by making it more difficult to forge signatures.
Every company should maintain a register containing particulars of documents on which the common seal has been affixed, including the description of the document, the date and number of the resolution authorising the affixation, the date of affixing the seal, the name(s) of the person(s) who attested the affixation, and the place at which the document was sealed. The register should be kept at the company's registered office.
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Frequently asked questions
A common seal is an official seal used by a company to authenticate and execute legal documents. It is the signature of the company and binds the company for all obligations undertaken in the document.
The primary purpose of a common seal is to make agreements, documents, or deeds entirely authentic and authoritative. It also helps to prevent forgery and fraud.
A common seal is typically made of metal and is capable of manual operation. It should have the name of the company and the state in which the registered office is situated engraved in legible characters.
The use of a common seal requires the approval of the company's board of directors. It should be affixed in the presence of the managing director or two directors and the company secretary or any other authorised person.
No, common seals are not mandatory. However, they are considered indispensable by some companies as they provide additional protection against forgery and fraud.
