Provision of common seal

11775 views 18 replies

Charu Srivastava

Company Secretary

4210 Points Joined July 2010

COMMON SEAL

A Company being an Artificial Person cannot sign for itself. Therefore the law provides for the use Common seal as a substitute of its signature. It serves as the token of the Company’s approval of documents and it shall be binding on the Company.

The following deeds and contracts are not valid unless made under the Common seal of the Company:-

1). Power of Attorney which would be made in favour of a person to execute the deeds on behalf of the Company.

2). Share Certificates

3). Share Warrants

4). Any deed as required by the Articles.

FEATURES OF COMMON SEAL

1). The common seal should be made of metal

2). The common seal should have the name of the company and state in which the registered office is situated. Default will attract a penalty of Rs. 5000

ADOPTION OF COMMON SEAL

The Common Seal is adopted at the first Board Meeting by a resolution of the Board. It means the Company should have common Seal right from the Incorporation. Even a new Common seal in place of existing should be adopted by a resolution of the Board.

AUTHORITY

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.

MODE OF AFFIXATION

Unless Articles provide for any other manner 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.

Note:- The share certificates issued by the company shall be sealed and signed in accordance with the provisions of the Share Certificate rules.

REGISTER OF COMMON SEAL

Every company should maintain a register containing particulars of documents on which the common seal of the company has been affixed and should be kept at the registered office of the Company.

CUSTODY

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.

OFFICIAL SEAL FOR USE OUTSIDE INDIA

A company whose objects require or comprise transactions of business outside India as provided in the Articles 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.

Each territory, district or place not situated in India should only one official seal and 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

Replies (18)

Ankur Garg

Company Secretary and Compliance Officer

114788 Points Joined January 2009

My first quick reading suggests that it is a very good, relevant and crisp article for students and professionals.

Truly appreciate your efforts. Looking forward to see some more articles from you. Do not forget to post the same in Article section.

Thanks

Charu Srivastava

Company Secretary

4210 Points Joined July 2010

Originally posted by : Ankur Garg
	My first quick reading suggests that it is a very good, relevant and crisp article for students and professionals. Truly appreciate your efforts. Looking forward to see some more articles from you. Do not forget to post the same in Article section. Thanks

Thanks a lot sir for your encouragement and support.

Ajay Mishra

Company Secretary

74342 Points Joined March 2009

Great Job Charu..........

Really this article will be very help full for him who wanted to know about "Common Seal".

I appreciate your valuable effort.

Deepak Gupta

CA Student

15927 Points Joined May 2011

SECRETARIAL STANDARD ON AFFIXING OF COMMON SEAL

https://www.icsi.edu/WebModules/Publications/FINALSS8.htm

Ajay Mishra

Company Secretary

74342 Points Joined March 2009

Hi Charu .....

You can also add in this article the format of Board Resolution for adoption of common seal in first board meeting.......

All the best....

Ankur Garg

Company Secretary and Compliance Officer

114788 Points Joined January 2009

AOA provisions Vs. Use of Common seal

It is very important for us to understand the provisions and position of Article of Association with respect to common seal as Company Law is silent about the process and use of common seal.

POSITION OF AOA IN PUBLIC COMPANY

As per section 28, it is optional for a public companies limited by shares to get its articles registered. It may be registered without its own set of articles. Section 28 of the Companies Act, 1956 provides that if a public company does not register articles of its own, the provisions in Table 'A' of Schedule I to the Act will automatically apply to such company. Generally, a public company formulates its own Articles and registers it along with Memorandum. Therefore a public company may either:—

(i) formulate and register Articles of its own within the provisions of the Act and the Memorandum of Association; or

(ii) adopt Table 'A' of Schedule I as its Articles; or

(iii) partially adopt Table 'A' and also have its own articles.

As per the judgement in Seth Mohan Lal v Grain Chambers Ltd. (1968), If a company has not expressly or by implication excluded any regulation in Table A, regulation will be deemed to be incorporated in its articles.

Now if the AOA of a public company specifically excludes “Table A” then provisions of your Public company AOA shall prevail over “Table A” regarding use of common seal.

If AOA includes “Table A” so far as it is applicable as per section 28(2) then also provisions of your Public company AOA shall prevail over “Table A” in case where any contradiction arise regarding use of common seal.

If your public company fully adopts “Table A”, then first of all contradiction should not arise, and if arise for some reason then provision of “Table A” shall prevail regarding use of common seal.

POSITION OF AOA IN PRIVATE COMPANY

It is essential for a private limited company to have its own articles including the four restrictions as provided in section 3(1)(iii) of the Companies Act, 1956. [Section 27(3)].

With these restrictions the private limited companies are having liberty to adopt all or any of the regulations contained in Table 'A'.

Now if AOA of a private company specifically excludes “Table A” then provisions of private company AOA shall prevail over “Table A” regarding use of common seal.

If AOA of private company includes “Table A” so far as it is applicable then also provisions of private company AOA shall prevail over “Table A” in case where any contradiction arise regarding use of common seal.

I hope this will also help to handle different situations.

Regards

Ankur

Charu Srivastava

Company Secretary

4210 Points Joined July 2010

Originally posted by : Ajay Mishra
	Hi Charu ..... You can also add in this article the format of Board Resolution for adoption of common seal in first board meeting....... All the best....

Thanks sir for the guidance.. would surely include the resolution..

Charu Srivastava

Company Secretary

4210 Points Joined July 2010

It is the value addition.

Thanks Ankur Sir for adding a feather to the cap

Sourav Banerjee MA,MSW

Shabda Bramha

8847 Points Joined July 2011

Originally posted by : Ankur Garg
	My first quick reading suggests that it is a very good, relevant and crisp article for students and professionals. Truly appreciate your efforts. Looking forward to see some more articles from you. Do not forget to post the same in Article section. Thanks

Guest

Originally posted by : Charu Srivastava
	ADOPTION OF COMMON SEAL The Common Seal is adopted at the first Board Meeting by a resolution of the Board. It means the Company should have common Seal right from the Incorporation. Even a new Common seal in place of existing should be adopted by a resolution of the Board.

Hi charu,

Very well write up! Very concise and precise!

Pls confirm whether it is necessary to adopt commone seal IN FIRST BOARD MEETING ?

I think it can be adopted later on also.

Pls clarify ???

Ankur Garg

Company Secretary and Compliance Officer

114788 Points Joined January 2009

Yes Neha it can be adopted later. There is no doubt at all.

Rgds

Charu Srivastava

Company Secretary

4210 Points Joined July 2010

Section 34(2) of the Companies Act states that

From the date of incorporation mentioned in the certificate of incorporation, such of the subscribers of the memorandum and other persons, as may from time to time be members of the company, shall be a body corporate by the name contained in the memorandum, capable forthwith of exercising all the functions of an incorporated company, and having perpetual succession and a common seal, but with such liability on the part of the members to contribute to the assets of the company in the event of its being wound up as is mentioned in this Act.

According to the abovementioned section the Company must have Common Seal since incorporate.It is a good practice to adopt i first Board Meeting though it can be adopted later.

Correct me if wrong.