What is a Common Seal?
It is an official seal that a company uses when it executes legal documents as a proof that the document is approved and rectified that the execution was the act and deed of the companies. It was widely used by companies in common law jurisdictions when they execute documents such as share certificates, transferable instruments, legal agreements and etc, although in modern times, most countries have made this an optional requirement to affix common seal.
How does it look like?
Basically it is a pair of metal plates with lower and upper dies that when press together on a piece of paper with “red sticker”, produces and embosses a print of the company name around the ring and the words “Common Seal” in the middle. In ancient times, companies used red melted wax but it has since been replaced with “red sticker”.
Common Seal and its legal purpose in Singapore
Since 31 March 2017, pursuant to the Companies (Amendment) Act, it is no longer a mandatory requirement for companies to affix common seal while executing legal documents. Before the amendments came into force, companies are required to affix common seal to execute legal documents as a deed in accordance to the provisions set out in their respective articles of association or constitution.
Prior to 31 March 2017, a typical article in a constitution of a company incorporated before 31 March 2017, would state that the common seal under the authority of the company would have to be affixed on the documents before 2 directors, a director and a company secretary, or a director and an authorized signatory.
With the enforcement of Companies (Amendment) Act, Sections 41A, 41B and 41C of the Companies Act (Cap. 50) expressly provide that a Common Seal is not a mandatory requirement.
Section 41A (1) provides that- “A company may have a common seal but need not have one.”
Section 41B (1) provides that- “A company may execute a document described or expressed as a deed without affixing a common seal onto a document by signature-
(a) on behalf of the company by a director of the company and a secretary of the company;
(b) on behalf of the company by at least 2 directors of the company; or
(c) on behalf of the company by a director of the company in the presence of a witness who attests the signature.”
Section 41C provides the “alternative to sealing”- “ Where any written law or rule of law requires any document to be under or executed under the common seal of a company, or provides for certain consequences if it is not, a document satisfies that written law or rule of law if the document is signed.”
As this amendment is outside of the constitution of a company, therefore the relevant provision set out in the existing constitution is not required to be amended to the effect of removing the requirement of affixing the common seal. However, it is a worth considering reviewing the existing constitution if it is worded in a way that expressly required directors to execute documents under the common seal, to avoid confusion pursuant to Section 41A where by virtue of this provision, affixing common seal is an option i.e. this requirement is not completely removed.
In other words, if the existing constitution provides that affixing common seal is a must, there is no other alternative to execute its deed in any other manner. However, the directors of the company can expressly resolve by way of passing special resolution to dispense with this requirement each time when a deed is required to be executed. In addition, companies may wish to amend or update the respective provision under their existing constitution to effect and enforce this change.
Last but not the least, it is worth noting that this current amendments to Companies Act have not removed the requirements for other types of seals such as official seal for use aboard, duplicate common seal and share seal.
For more information, about Common Seal and whether this amendment affect you and your company, please feel free to visit my website- The Corporate Secretary.