A company seal, sometimes also called a corporate seal or common seal, is a device for embossing the company’s name (and usually the company registration number) onto documents. Historically, it was a requirement to seal contracts, deeds and share certificates in this way to make them valid.
The use of seals in one form or another goes back thousands of years. Their use by companies was especially common in countries with a legal system based on that of the United Kingdom, although the extent of their use has reduced in recent years.
Affixing the company seal to a document signified a definite section, a clear indication of authorisation and action on behalf of the company. More specifically, a sealed document represented an act and deed of the company, which had stronger legal force than a merely signed document.
While older seals could be cumbersome and messy, with the imprint pressed into melted wax, modern company seals are quick and easy to use, instead leaving an indentation on the document. The embossed imprint is produced by the two halves of the seal being pressed together upon a piece of paper or card.
What’s the UK position now?
The legal position in England, Wales and Northern Ireland is defined in section 44 of the Companies Act 2006. This states that, when executing documents, a company seal may be used, but is not specifically required:
(1) Under the law of England and Wales or Northern Ireland a document is executed by a company-
(a) by the affixing of its common seal, or
(b) by signature in accordance with the following provisions.
(2) A document is validly executed by a company if it is signed on behalf of the company-
(a) by two authorised signatories, or
(b) by a director of the company in the presence of a witness who attests the signature.
(3) The following are “authorised signatories” for the purposes of subsection (2)-
(a) every director of the company, and
(b) in the case of a private company with a secretary or a public company, the secretary (or any joint secretary) of the company.
(4) A document signed in accordance with subsection (2) and expressed, in whatever words, to be executed by the company has the same effect as if executed under the common seal of the company.
These legal provisions mean a seal is no longer required to execute documents, which can instead be signed by two officers of the company or by a single director and an independent witness. However, a company seal remains a legitimate means to authenticate documents.
Where a seal is used, the Companies Act requires that the company’s name must be engraved in legible characters upon it. Under section 45 of the Act, failure to do so constitutes an offence by the company and its officers.
Why might a company still use a company seal?
While it’s not a legal requirement, for various reasons a large number if UK companies choose still to use a company seal:
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1 Doing business internationally
Company seals are still legally required in many countries. If a UK company undertakes business abroad or with foreign customers or suppliers, they may be required (or find it prudent) to use a company seal on formal documents. If not, they run the risk that a legal document may not be recognised as valid by overseas lawyers or courts. Even where a document is ultimately recognised as valid without a company seal, the company may waste time and money in getting to that position which could have been saved by applying a seal in the first instance.
A company seal may be more convenient, since it replaces the need for two authorised signatories to sign each document. With a company seal, a single company representative can authenticate documents quickly, potentially saving time of busy signatories. This may be particularly useful where a company’s authorised signatories are in different locations or work remotely, meaning any document would have to be sent from place to place or wait for them to be available.
3 Security and control
A company may wish still to seal documents as a means of protection against forgery, which signatures can be susceptible to. As a company will usually have a single seal, the use of which will be carefully monitored, it can also provide a measure of internal control for the business.
4 Ensuring proper execution of documents
Some companies prefer the formality and consistency offered by use of a company seal. It can help prevent any questions of irregularity or improper execution of a document, for example an invalid combination of signatories.
This may be particularly useful on particularly formal documents like deeds.
5 Where use is required or advised
The company’s articles of association may enforce use of a seal, although this provision will typically have been included for one or more of the other reasons above.
In some instances, a legal professional may also request that a document bears a company seal.
Use of a company seal helps to project a professional, formal image. It may convey a sense of tradition, elegance and flair.
How a business can use a company seal
Where a company decides to operate a company seal to authenticate documents, it’s prudent to pass a resolution documenting:
- The decision to purchase and utilise a company seal; and
- Who is authorised by the company to execute documents via the seal
The seal can only be used by the person who is authorised to do so. It’s best to store it securely – for example in a locked cabinet – to prevent misuse. The company should also maintain an official record of use of the seal, in the form of a register of sealings. This will usually be kept with the company’s statutory registers at the registered office address (or, in some cases, a single alternative inspection location).
Maintaining a written record in this way helps to control the company seal’s use, protecting the company from its unauthorised usage and supporting the validity of legitimate sealings.
Even where a business uses a company seal, it’s possible for there to be circumstances or documents for which it’s not required to be used.