Common Seal Requirement Under Companies Act, 2013 By CS Ankita Gupta


In today’s post I will enlighten all the learned professionals about the common seal of the company, what importance does it hold and whether it is compulsory to have a common seal or not.

What is a common seal?

To start with the basics of the seal the dictionary meaning of common seal is “Stamped or blind-embossed (see blind embossing) imprint of a firm's legal name, as additional evidence that an agreement or a document was executed on behalf of the firm by its authorized agents or officers. Also called corporate seal.”

In general, Common Seal means a metal stamp for stamping documents with the name of the company to show that they have been approved officially.

There is no definition prescribed under the Companies Act, 1956 and Companies Act, 2013. As per the Secretarial Standards issued by Institute of Company Secretaries of India, Common Seal means, the metallic seal of a company which can be affixed only with the approval of the Board of Directors of the Company. It is the signature of the company to any document on which It is affixed and binds the company for all obligations undertaken in the document.

Why is common seal required?

We are all aware that company being an artificial person cannot act on its own, therefore for carrying out its activities and for entering into various agreements its acts through its Board of Directors. But how does a company enter into such agreements? The answer to it is the common seal of the company which is used as the signature of the company, which binds the company for all the obligation undertaken by the company. It is to be used in the manner prescribed in the Articles of Association and the Companies Act, 2013. Any document, on which the company’s seal is affixed and is duly signed by the authorized official of the company becomes binding on the company.

The Common Seal should be adopted by a resolution of the Board. The Common Seal is generally adopted at the first Board meeting. The impression of the Common Seal should be made part of the minutes of the meeting in which it is adopted.

Importance of common seal?

The common seal has many uses and benefits when used on company documents. The main importance is that it makes the documents and deeds entirely authentic and authoritative. Moreover, the seal makes sure that the documents are not easily forged. Thus, it averts cases of fraud that arise from the quick and easy forgery of the managers’ signatures. Moreover, the seal is authorized for use by a limited number of employees in an organization.

Physically, seals used to be used to make an impression on melted wax on the relevant document endorsing them as the official transactions of the company, although modern seals will usually only leave an indentation or impression on the paper.

How is common seal affixed?

A) Article 2(ii) of TABLE F - Articles of Association of a Company Limited by Shares specifies that every certificate shall be issued under the seal of the Company.

B) 79(i) & (ii) of TABLE F and 30(i) & (ii) of TABLE H – (Articles of Association of a Company Limited by Guarantee and not having Share Capital) provides that

  • the Board shall provide for the safe custody of the seal.
  • The seal of the company shall not be affixed to any instrument except by the authority of a resolution of the Board or of a committee of the Board authorized by it in that behalf, and except in the presence of at least two directors and of the secretary or such other person as the Board may appoint for the purpose; and those two directors and the secretary or other person aforesaid shall sign every instrument to which the seal of the company is so affixed in their presence.
Documents on Which Common Seal is Mandatory?

Under the Companies Act, 2013, the following documents are statutorily required to be affixed with a Common Seal:

  • A certificate of shares or stock; (The share certificates issued by the company shall be sealed and signed in accordance with the provisions of the Share Certificate rules.)
  • A power of attorney for the execution of deeds;
  • A power of attorney authorizing a person to use its official seal at a place outside India;
  • An instrument of proxy executed by a body corporate;
  • A report of the Inspector under Section 223 of the Companies Act 2013;
  • Any document as required by Liquidator in the event of winding up.
Note:

Though in Companies Act, 2013, a common seal was required for a Company to provide various authorizations and attestations on behalf of the Company which now has been made optional and the Director's signature is acceptable in lieu of the common seal of the Company. But Considering the facts, the Common Seal is indispensable. On affixing the common seal, there is a legal obligation on the part of the authorized officials and the Company and must be therefore affixed in accordance with the Articles of Association of the Company on the above-mentioned documents.

Register and Custody of Common Seal

Every company should maintain a register containing particulars of documents on which the Common Seal of the company has been affixed and should be kept at the registered office of the Company.

The Common Seal should be kept at the registered office or at any other office of the company authorized by the Board. The Common Seal should be kept in the custody of a director of the company or the company secretary or any other official, as authorized by the Board.

How do I get a new corporate seal?

  • Head to a local office supply store;
  • Design your corporate seal;
  • Choose the embosser; and
  • Purchase the corporate seal. (the common seal of the company should be purchased)

Click here to read the disclaimer


Write a Comment