Updated on: May 30th, 2023
9 min read
A company is a separate legal entity, meaning it is treated as separate from its members and has its own identity. It is an artificial judicial person having powers, rights, duties and obligations prescribed by law. Thus, it can own property, incur debts, borrow money, have a bank account, enter into contracts, employ people, and sue or be sued in the same manner as an individual. The signature of a company is a common seal. A company requires a common seal to be affixed on agreements and documents that the company enters into with third parties and bind the company.
The common seal of a company is a stamped imprint of a company’s legal name. It is affixed on agreements and documents that act as evidence that an agreement, contract or document was executed by its authorised agents or officers on behalf of the company. It is also called a corporate seal.
Common seal means the metallic seal of a company for signing or stamping documents with the company’s name to show they have been approved officially. It is the company’s signature to a document that is affixed and binds the company to all obligations undertaken. All documents on which the company’s seal is duly signed and affixed by the authorised company official become binding on the company.
The Companies Act, 2013 does not define a common seal. According to the Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI), a common seal means a metallic company seal that can be affixed only with the approval of the company’s board of directors. It is the official company signature. Every company will have one company seal upon incorporation. It should be used in the manner prescribed in the company Articles of Association (AOA) and the Companies Act, 2013.
According to the Secretarial Standards on affixing a common seal, the company common seal should be made of metal and capable of manual operation. The Companies Act, 2013 does not specify any material from which the common seal should be made. However, the common seal should be adopted by a Board resolution, generally in the company’s first board meeting. The common seal impression should be the part of the minutes of the meeting in which it is adopted.
The common seal must have its name and the state in which its registered office is situated engraved in legible characters. A common seal may also have only its name engraved in legible characters.
All companies should maintain a register containing particulars of documents on which the common seal is affixed, and it should be kept at the company’s registered office. The common seal register should also contain the following particulars:
The common seal must be kept in the custody of a director, company secretary, or any other official authorised by the Board.
The documents upon which the common seal is used or affixed are as follows:
The Companies Act, 2013 does not define a common seal. However, it prescribed the manner in which a common seal should be used. A common seal is a metallic company seal that can be affixed only with the approval of the company's board of directors. It is the official company signature.
The common seal has various uses and benefits. The primary importance is that it makes the agreements, documents or deeds entirely authoritative and authentic. Moreover, the common seal ensures that documents are not forged easily. It averts fraud cases arising from the easy and quick forgery of the managers’ signatures since it is authorised for use by a limited number of company employees.
Though a common seal of a company is not mandatory, it is indispensable. Upon affixing the common seal, a legal obligation is created where the authorised officials and the company is responsible for the acts and duties mentioned in the document upon which it is affixed.
Initially, the Companies Act, 2013 required the common seal to be affixed on specific documents, such as share certificates, bills of exchange, etc. The Companies (Amendment) Act, 2015 made the common seal optional and not mandatory. As per the amendment, all documents that require affixing the common seal can be signed by two directors or one director and a company secretary instead of affixing the common seal.
The common seal is a stamped imprint of a company’s legal name or name and state where its registered office is located. It is affixed on agreements and documents that act as evidence that an agreement, contract or document was executed by its authorised agents or officers on behalf of the company. It is also called a corporate seal.
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