A Company is an Artificial Person in eyes of Law, it has no soul, it takes birth by the Operation of Law and ends it’s life by the Operation of Law. Like a natural person, it can’t sign by its own. As still it’s an Artificial Person and as it operates in the world market, there arises some situation where Law asks a Company to sign by putting its Common Seal on the Documents.
The acts of a Company in India are governed by the Companies Act, 2013. And the said Act, does not define the term ‘Common Seal’. Thus generally, a Common Seal mean the official seal of Company, wherein the name of the Company is engraved in full. Common Seals can generally be obtained from rubber stamp makers at minimal cost and at short notice. There is no compulsion under the Companies Act, 2013 that the common seal should be made in metal or any other material.
After the incorporation of a Company, generally in the first Meeting of Board of Directors the Common Seal of the Company is adopted, by passing a resolution in that meeting. If the Company desires substitute its Common Seal, then it can do so only with the authorization by the way of passing a resolution in any subsequent Board Meeting (or any Committee of the Board as authorised). (Here find the resolution templates – link).
The Common Seal of a Company is generally used for the following purposes:
a. For Execution of Deeds empowering any person, either generally or in respect of any specified matters, as its attorney.
b. On the Share Certificate/Warrants of the Company
c. Loan Agreement with the Banker(s)
Affixing the Common Seal of a Company in the documents, for whatsoever reason, is not required in every pages of the Documents. It is a general and acceptable practice to affix it at the Last / some of the necessary pages, beside the Signature of the Company’s Authorised Official.
The Authorised Official who puts the Common Seal on any document should sign and mention the date beside the seal.
The Companies are required to maintain a Register wherein the details of the Document(s), where Common Seal was affixed, has to entered. (Here find a format of such Register – link)
Such Register has to be kept in the Safe Custody of the Official, who is duly authorised by the Board of Directors of a Company at the Registered Office of the Company.
***UK’s Companies Act, 2006 have made it optional for all the Companies to have Common Seal, but subject to the condition that if a Company wants to have a Common Seal then the name of the Company must be engraved in legible characters on the seal and failure to do so constitutes an offence under Section 45 of the Companies Act 2006. The Companies (Amendment) Act 2015 With the notification of the Companies Amendment Act 2015, the use of common seal has been made optional on the part of the company.