INTRODUCTION
Common seal 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. Companies Act, 1956 provides that, the company shall have a common seal from the date of its incorporation. However, Companies Act, 1956 does not describe the form, mode of affixing common seal or its custody etc. To remove the ambiguity and to prescribe best and uniform practices with respect to affairs pertaining to common seal, Council of the Institute of Company Secretaries of India has issued Secretarial Standard-8 (SS-8): “Affixing of Common Seal”.
In this Article we have thrown light on provisions pertaining to Common seal contained in Companies Act, 1956 and SS-8.
A company shall have only one common seal. The Articles of Association provides the procedure relating to affixing of common seal. Companies Act, 1956 requires affixation of the common seal on certain documents, share certificates and share warrants issued by the company.
APPROVAL
The common seal should be adopted by a resolution of the Board. The common seal is generally adopted at the first Board meeting. The impression of the common seal should be made part of the minutes of the meeting in which it is adopted.
FORM AND CONTENT
The common seal should be made of metal and capable of being manually operated. The common seal should have the name of the company and state in which the registered office is situated engraved in legible characters.
AUTHORITY AND MODE OF AFFIXATION
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 of Association 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.
REGISTER OF DOCUMENTS EXECUTED UNDER COMMON SEAL
Every company should maintain a register containing description of documents on which the common seal of the company has been affixed along with 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.
The common seal should be kept at the registered office or at any other office of the company authorized by the Board. The common seal should be kept in the custody of a director of the company or the company secretary or any other official, as authorized by the Board.
CUSTODY OF COMMON SEAL
In the modern era, where the parties to an agreement are constantly travelling or if a company has operation in different parts of the country, below question arises
"whether Board Resolution needs to be passed or any other formality needs to be done, if common seal is proposed to be affixed outside the state/ city where the registered office is situated?”
Please note that there is no prohibition on moving the common seal out of registered office in Companies Act, 1956 or Secretarial Standard. However, to avoid any ambiguity and troubles at later stage, the companies normally pass the resolution for carrying the common seal outside registered office. However, it would be prudent if a clause may be inserted in the resolution authorizing the affixing of common seal itself. A sample Board Resolution has been given below for reference:
RESOLVED that the common seal be affixed on all the necessary documents executed/to be executed for availing the above mentioned credit facilities and Shri ……………….. and ………………. of the company be and hereby jointly and severally authorized to counter-sign wherever the common seal is affixed.
RESOLVED FURTHER that the common seal be kept in the custody of Shri ……………….. Secretary of the company and may be carried at such place outside registered office if required for execution of documents pertaining to the aforesaid activities.
SEAL OF COMPANY FOR USE OUTSIDE INDIA: OFFICE SEAL
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.
The office seal shall be a facsimile of the common seal of the company. 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.
Use of official seal requires an enabling provision in the Articles. A company may have more than one official seal. However, each territory, district or place not situated in India should not have more than one official seal. A deed or other document to which an official seal is duly affixed shall bind the company as if it had been sealed with the common seal of the company.
JUDICIAL VIEW ON AFFIXING OF COMMON SEAL
In
Panchanan Dhara & Others vs Monmatha Nath Maity (Decd.) thru L.RS. [2006] 131 Comp Cas 577 (SC), the Supreme Court observed that, “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 a 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.”
ALTERNATIVE OF AFFIXING COMMON SEAL
While executing any agreement, deed etc. below execution clause may be used in place of common seal:
For XYZ Limited
(Authorised Signatory)
