Company seal

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A company seal (sometimes referred to as the corporate seal or common seal) is an official seal used by a company. Company seals were predominantly used by companies in common law jurisdictions, although in modern times, most countries have abrogated the use of seals.[1]

Traditionally, the seal was of some legal significance because the affixing of the seal signified that the document was the act and deed of the company, whereas when a document was merely signed by a director, then that was deemed to be an act carried out on behalf of the company by its agents, which was subject to applicable restrictions and limitations under the ordinary. CorporateSeals.Com law of agency.

Corporate Seals are generally only used for two purposes by corporations today:

  • Documents which need to be executed as deeds (as opposed to simple contracts), may be executed under the company's common seal
  • Certain corporate documents, for example share certificates are often issued under the company seal (and some countries required that share certificates be issued under the common seal)

Physically, seals used to be used to make an impression on melted wax on the relevant document, although modern seals will usually only leave an indentation or impression on the paper (although sometimes a red wafer is used to imitate old red wax seals, and to make the sealing show up better on photocopies).


[edit] Legal position in India

Sections 46 and 48 of the [Indian] Companies Act, 1956 read as under:

46. Form of contracts. -(1) Contracts on behalf of a company may be made as follows: - (a) a contract which, if made between private persons, would by law be required to be in writing signed by the parties to be charged therewith, may be made on behalf of the company in writing signed by any person acting under its authority, express or implied, and may in the same manner be varied or discharged; (b) a contract which, if made between private persons, would by law be valid although made by parole only and not reduced into writing, may be made by parole on behalf of the company by any person acting under its authority, express or implied, and may in the same manner be varied or discharged. (2) A contract made according to this section shall bind the company.

48. Execution of deeds.-(1) A company may, by writing under its common seal, empower any person, either generally or in respect of any specified matters, as its attorney, to execute deeds on its behalf in any place either in or outside India. (2) A deed signed by such an attorney on behalf of the company and under his seal where sealing is required, shall bind the company and have the same effect as if it were under its common seal.

Thus, wherever the articles of Association require, the common seal has to be affixed so as to bind the company. But in the recent years, the Supreme Court of India has held in Panchanan Dhara and Ors. Vs. Monmatha Nath Maity (Dead) thr. L.Rs. and Anrcitation reference - [2006] 131 Comp Cas 577 (SC) that "So far as the question of putting up of the seal of the Company is concerned, it is a relic of the days when mediaeval barons, who could not read or write, used their rings to make a characteristic impress. Even in absence of a seal, the Company may still be held to be liable having regard to the nature of transaction and the authority of those who had executed it. If the act of the Directors is not ultra vires or no public policy is involved, the parties acting thereupon cannot be left at large. "

Further the Supreme Court of India cited with approval, the decision in 'Probodh Chandra v. Roadoils (India) Ltd. AIR 1930 Cal 782' In this case, the Supreme Court of India said that Section 46 merely lays down the mode of signing contract on behalf of the company. Once a deed is executed on behalf of the company, it is company and not the persons signing can sue or be sued on the contract if the evidence is clear that the signature was only that of the company. [See also OTV Birwel Co. Ltd. v. Technical and General Guarantee Co. Ltd. (2002) 4 All ER 668.]

Hence though it may seem apparently that the common seal is the requirement of law, the absence of it would not vitiate the contract and the company would still be bound by the contract if such contract is not otherwise ultra vires the company. "CorporateSeal.Com"

[edit] Footnote

  1. ^ For example, in the United Kingdom, see section 36A of the Companies Act 1985 abolishing the requirement to affix company seals to a deed. Also see the Alberta Business Corporations Act, R.S.A. 2000, c. B-9, s. 25.