What is Common Seal of Company? Meaning, Stamp, Format, Uses

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.

Common seal meaning

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.

Common seal of 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.

Creation of common seal

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.

Common seal format

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.

Procedure to affix common seal

• The common seal should be affixed to an instrument only by the authority of a resolution of the Board or a committee authorised by the Board.
• The common seal should be affixed in the presence of the managing director or two directors and the company secretary or any other person as the Board may authorise for the purpose.
• The persons in whose presence the common seal is affixed should sign every instrument to which the common seal is so affixed.
• The AOA of a company can provide for affixing the common seal in any other manner.

Common seal register

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:

• Description of the document
• The number and date of the resolution authorising the common seal affixation 
• The date of affixing the seal on the document 
• Names of persons who attested the affixation 
• The 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.

Uses of a common seal

The documents upon which the common seal is used or affixed are as follows:

• Share certificates
• Bills of exchange
• Memorandum of association
• Power of attorney for the execution of deeds
• Hundi or promissory note
• Instrument of proxy executed by a body corporate
• Power of attorney authorising a person to use its official seal at a place outside India
• Report of an inspector under Section 223 of the Companies Act, 2013

Frequently Asked Questions

What is the meaning of a common seal under company law? 

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.

What is the importance of a common seal for a company?

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.

Is the common seal mandatory for a company?

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.

Is common seal mandatory as per the Companies Act, 2013?

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.

What is the meaning of a 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.