Should a Company opt for a Common Seal?
Common Seal has not been defined anywhere in the Companies Act, 2013 nor was it defined in the erstwhile Companies Act, 1956.
But through references in various sections and the Articles of Association of the Companies Act and as per Secretarial Standards issued by the Institute of Company Secretaries of India, the Common Seal and its application, safe-keeping etc. are to be understood.
The 1956 Act’s language was such that Common Seal was mandatory to be adopted by the Company. When the 2013 Act was promulgated, the Common Seal was mandatory but The Companies (Amendment) Act, 2015 made it optional.
Prior to the amendment, Section 9 of the Companies Act, 2013 stated that “From the date of incorporation mentioned in the certificate of incorporation, such subscribers to the memorandum and all other persons, as may, from time to time, become members of the company, shall be a body corporate by the name contained in the memorandum, capable of exercising all the functions of an incorporated company under this Act and having perpetual succession and a Common Seal, with power to acquire, hold and dispose of property, both movable and immovable, tangible and intangible, to contract and to sue and be sued, by the said name.”
The words ‘and a common seal’ were thereafter deleted.
A Common Seal, if adopted by a Company, should be used on the following documents, as provided for under various sections of the Companies act, 2013:
- Section 22- Execution of Bills of Exchange, etc.
- Section 22- Authorise any person, either generally or in respect of any specified matters, as its attorney to execute other deeds on its behalf in any place either in or outside India;
- Section 46- Certificate of shares;
- Section 105-An instrument of proxy executed by a body corporate;
- Section 223- Authentication of Report of an Inspector;
Further the Articles of Association have to provide for the safekeeping and authority for its usage to the Board of Directors.
A Company has the option to adopt a Common Seal. If the Company adopts a Common Seal, it has to provide for the following:
- Adoption in Articles of Association
- Adoption of Common Seal in Board meeting of the Company
- Authority to Director for safe keeping
- Authority to Directors read with Articles for its application on documents
- Maintaining of a Register of Common Seal