What is a company seal?
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A company seal is a device for stamping the company's name in paper. At common
law, any contract entered into by a company had to be under seal, subject to
some minor exceptions. From 1875 until 1989 Act a document had to be executed
under seal if this would be the case if executed by an individual. Since the
1989 abolished the requirement for a seal, not even a deed has to be executed
under seal, provided it is signed by a director and secretary, or two directors,
of the company and is expressed to be executed as a deed. In practice many companies
still use a company seal for deeds, share certificates and other important documents.
After all, a company seal is a good authenticating device and it was only in
1875 that the requirement for all contracts executed by a company to be under
seal. Habits die hard in the legal profession.
The statutory position on the execution of documents by companies is now:
CA 1985, sec36: Under the law of England and Wales a contract may be made-
(a) by a company, by writing under its common seal, or
(b) on behalf of a company, by any person acting under its authority, express or implied; and any formalities required by law in the case of a contract made by an individual also apply, unless a contrary intention appears, to a contract made by or on behalf of a company.
sec36A (1) Under the law of England and Wales the following provisions have effect with respect to the execution of documents by a company.
(2) A document is executed by a company by the affixing of its common seal.
(3) A company need not have a common seal, however, and the following subsections apply whether it does or not.
(4) A document signed by a director and the secretary of a company, or by two directors of a company, and expressed (in whatever form of words) to be executed by the company has the same effect as if executed under the common seal of the company.
(5) A document executed by a company which makes it clear on its face that it is intended by the person or persons making it to be a deed has effect, upon delivery, as a deed; and it shall be presumed, unless a contrary intention is proved, to be delivered upon its being so executed.
(6) In favour of a purchaser a document shall be deemed to have been duly executed by a company if it purports to be signed by a director and the secretary of the company, or by two directors of the company, and, where it makes it clear on its face that it is intended by the person or persons making it to be a deed, to have been delivered upon its being executed.
A purchaser means a purchaser in good faith for valuable consideration and includes a lessee, mortgagee or other person who for valuable consideration acquires an interest in property.
CA 1985, sec36B deals with the position in Scotland.
sec37 deals with bills of exchange and promissory notes and sec39 - sec39 with execution and use of seals abroad.
sec40 allows a company to have a separate 'Securities' seal for use on share
certificates, etc.
Table A provides:
101. The seal shall only be used by the authority of the directors or of a committee of the directors authorised by the directors. The directors may determine who shall sign any instrument to which the seal is affixed and unless otherwise so determined it shall be signed by a director and by the secretary or by a second director.
Table A art. 6 specifies that share certificates must be issued under seal. The articles of many modern companies modify these provisions.
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