We all are aware that a Company being an artificial person does not have a physical presence. Therefore, it acts through its Board of Directors for carrying out its activities and for entering into various agreements. The Company uses Common Seal as its Signature. Here, comes the role of “Common Seal”.
Definition of Common Seal: There is no definition prescribed under the Companies Act, 2013. As per the Secretarial Standards issued by Institute of Company Secretaries of India, 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 and each company shall have only one seal, on its incorporation. It is to be used in the manner prescribed in the Articles of Association 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.Affixing of Common Seal under the Act
Article 2(ii) of TABLE F – Articles of Association of a Company Limited by Shares specifies that every certificate shall be issued under the seal of the Company. 79. (i) & (ii) of TABLE F and 30(i) & (ii) of TABLE H – (Articles of Association of a Company Limited by Guarantee and not having Share Capital) provides that (i) 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 authorised 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.
Relevant Sections in Companies Act, 2013 Section 9 Effect of Registration
Registration of Memorandum of Association of the Company with Registrar of Companies, enables the Company to exercise all the functions of as incorporated company and have a perpetual succession and Common Seal with the power to acquire, hold and dispose of property, both movable and immovable, tangible and intangible, to contract and to sue and be sued, by its name.
Section 12 Registered office of company:
Section 12(3)(b) provides that every company shall have its name engraven in legible characters on its seal.
Section 22 (1) Execution of bills of exchange, etc.
A bill of exchange, hundi or promissory note shall be deemed to have been made, accepted, drawn or endorsed on behalf of a company if made, accepted, drawn, or endorsed in the name of, or on behalf of or on account of, the company by any person acting under its authority, express or implied. (2) A company may, by writing under its common seal, 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. (3) A deed signed by such an attorney on behalf of the company and under his seal shall bind the company and have the effect as if it were made under its common seal. Certificate of shares A certificate, under the common seal of the company, specifying any shares held by any member, shall be prima facie evidence of the title of the member to such shares. Rule 5(3) of Companies (Share Capital and Debentures) Rules, 2014 regulates – “Every share certificate shall be issued under the seal of the company, which shall be affixed in the presence of, and signed by- (i) two directors duly authorized by the Board of Directors of the company for the purpose or the committee of the Board, if so authorized by the Board’; and and (b) the secretary or any other person authorised by the Board for the purpose.
Section 46. (1) A certificate, issued under the common seal of the company, specifying the shares held by any person, shall be prima facie evidence of the title of the person to such shares.
Section 105 Proxies The instrument appointing a proxy shall— (a) be in writing; and (b) be signed by the appointer or his attorney duly authorised in writing or, if the appointer is a body corporate, be under its seal or be signed by an officer or an attorney duly authorised by it.
Section 223 Inspector’s report. The report of any inspector shall be authenticated either— (a) by the seal of the company whose affairs have been investigated; or (b) by a certificate of a public officer having the custody of the report, as provided under section 76 of the Indian Evidence Act, 1872 (1 of 1872), and such report shall be admissible in any legal proceeding as evidence in relation to any matter contained in the report.
Section 290 Powers and duties of Company Liquidator. The liquidator has been granted a power to use the common seal of the company wherever necessary in case of winding up of the Company. (1) Subject to directions by the Tribunal, if any, the Company Liquidator, in a winding up of a company by the Tribunal, shall have the power to do all acts and to execute, in the name and on behalf of the company, all deeds, receipts and other documents, and for that purpose, to use, when necessary, the company’s seal;
Summary: Documents on which common seal is mandatory: A certificate of shares or stock; 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; Any document as required by Liquidator in the event of winding up. Every company should maintain a register containing particulars of documents on which the official seal of the company has been affixed.
Conclusion: Considering the above facts, the Common Seal is indispensible. 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.