Common Seal – Requirements in Light Of Companies (Amendment) Act, 2015
A Company is a separate legal entity distinct from its Members. It is an artificial judicial person with many rights, obligations, powers, and duties prescribed by law. A company incorporated under the Companies Act, 2013 is vested with a corporate personality so it bears its own name and acts under the name. Therefore, it is capable of owning property, incurring debts, borrowing money, having a bank account, employing people, entering into contracts and suing or being sued in the same manner as an individual. To sum up, "a company is a voluntary association for profit with capital divisible into transferable shares with limited liability, having a distinct corporate entity and a common seal with perpetual succession".
Therefore, A Company, being an artificial person, requires a Common Seal to be affixed on various agreements which binds the Company.
DEFINITION OF COMMON SEAL
There is no prescribed definition for Common Seal under the Companies Act, 2013. As per the Secretarial Standards issued by Institute of Company Secretaries of India, effective from 6th November 2008, a 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. In other words, Common Seal is the official signature of the company.
Each company shall have only one seal, on its incorporation.
It is to be used in the manner as prescribed in the Articles of Association of the Company 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, generally adopted in the First Board Meeting of the Company.
The impression of the common seal should be made part of the minutes of the meeting in which it is adopted.
As per Secretarial Standards on Affixing Common Seal, the common seal should be made of metal and capable of being manually operated, though Companies Act, 2013 does not specify any material with which Common Seal should be made.
The common seal should have the name of the company and state in which the registered office is situated engraved in legible characters. Section 12(3)(b) provides that every company shall have its name engraved in legible characters on its seal.
The common seal should be affixed to any instrument only by authority of a resolution of the Board or a committee authorized by the Board.
The common seal should be affixed in the presence of Managing Director or any two directors, and the company secretary or any other person as the Board may authorize for the purpose.
The Articles may provide for affixing of common seal in any other manner.
The persons in whose presence the seal is affixed should sign every instrument to which the seal of the company is so affixed.
Every company should maintain a register containing particulars of documents on which the common seal of the company has been affixed.
The register should contain the description of the document; date and number of the resolution authorizing the affixation of common seal; date of affixing seal on the document; name(s) of person(s) who attested the affixation; and the place at which the document was so sealed.
The register should be maintained at the Registered Office of the Company
OFFICIAL SEAL FOR USE OUTSIDE INDIA
A Company whose objects require or comprise transactions of business outside India may have for use in any territory, district or place not situated in India an official seal, which shall be a facsimile of the common seal.
A company may have more than one official seal. Each territory, district or place not situated in India should not have more than one official seal
The official seal should be facsimile of the common seal.
Official seal should have engraved in it the name of the territory, district or place where it is to be so used in addition to the name and state in which the registered office of the company is situated.
The official seal should be adopted by a resolution of the Board.
A new official seal in place of an existing official seal should be adopted by a resolution of the Board.
The impression of the official seal should be made part of the minutes of the meeting in which it is adopted.
Use of official seal requires an enabling provision in the Articles of Association of the Company.
The Companies (Amendment) Act, 2015
Common Seal Optional: Companies Act, 2013 required common seal to be affixed on certain documents (such as a bill of exchange, share certificates, etc.) Now, with The Companies (Amendment) Act, 2015 coming into force the common seal is no more mandatory.it has been made optional. All such documents which required affixing the common seal may now instead be signed by two directors or one director and a company secretary of the company.
Consequently, several sections of Companies Act, 2013 dealing with common seal have been amended to incorporate the above requirement.
RELEVANT SECTIONS IN COMPANIES ACT, 2013
Section 22 (2):
A company may, by writing, under its common seal, if any, authorize 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.
Provided that in case a company does not have a common seal, the authorization under this sub-section shall be made by two directors or by a director and the Company Secretary, wherever the company has appointed a Company Secretary
Certificate of Shares
A certificate, issued under the common seal, if any, of the company or signed by two directors or by a director and the Company Secretary, wherever the company has appointed a Company Secretary, specifying the shares held by any person, shall be prima facie evidence of the title of the person to such shares.
Article 2(ii) of Table F of Companies Act, 2013, Articles of Association of a Company Limited by Shares states that Every certificate shall specify the shares to which it relates and the amount paid-up thereon and shall be signed by two directors or by a director and the company secretary, wherever the company has appointed a company secretary:
Provided that in case the company has a common seal it shall be affixed in the presence of the persons required to sign the certificate.
Article 79. (i) & (ii) of TABLE F and 30(i) & (ii) of TABLE H of Companies Act, 2013 – (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
(ii) 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.
GENERAL DOCUMENTS ON WHICH COMMON SEAL IS AFFIXED
Memorandum of Association
Bills of Exchange
Hundi or Promissory Note
A power of attorney for 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;
Considering the above 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 has to be therefore affixed in accordance with the Articles of Association of the Company.
Bibliography: Company Law Study Material Executive Program
Secretarial Standard 8 by Institute of Company Secretaries of India