Common Seal for Private Ltd Company: Definition, Format, Purpose & Requirement

A common seal, also known as a company or corporate seal, is an official stamp used by companies to authenticate documents formally. For private limited companies, the common seal holds significant legal and corporate importance, lending authority and validation to various business documents and agreements.

Common Seal

A common seal is one of the most important instruments used during the governance of companies. This is because a common seal represents a corporation in physical terms as having a legal personality. The article presents the meaning and the purpose of a common seal.

Meaning of Common Seal

A common seal is generally a metal stamp that is engraved with the name of a company which is legally recognised, often called a ‘corporate seal.’ Authorised persons sign papers using it so that the same becomes effective as a legal document for the company.

Common Seal of the Company

Private limited companies in India are governed by certain provisions dealing with the use of the common seal, mainly under the Companies Act, 2013. The following section discusses its legal context.

Under the Companies Act, 2013, a private limited company is not mandated to obtain a common seal. If sanctioned by the Board, then it is allowed. The Institute of Company Secretaries of India provides more guidelines for common seal on standardised and compliance issues. 

Creation of Common Seal

To form a common seal requires careful designing and formal approval. Here are the designing requirements and steps of the board for creating a corporate seal.

• Designing of Common Seal

A common seal shall bear the name of the company and state in which it is incorporated written legibly and clearly. Other than these, there are some legal standards to be followed regarding the figure and the script of an inscription in a common seal.

• Board Approval to form the Seal

The common seal can only be created and used subject to approval of the board, often in a resolution passed by the board. An authorisation is also needed to obtain such an approval in order to achieve compliance.

Common Seal Format

The common seal’s design format is generally consistent across companies but varies slightly based on size and style preferences. Here’s an overview of the standard format and types of seals commonly used.

• Company Name: The registered name of the company, usually in capital letters 
• Corporate Identifier: The term ‘Common Seal’ or ‘Corporate Seal.’
• Incorporation Details: Typically, the place and year of incorporation, like ‘Incorporated in [Country]’ or ‘Est. [Year].’
• Border Design: A circular border, sometimes with ridges or dots, to enhance the visual appeal.

Standard Format for Common Seal

A common seal is usually circular or oval, with the company name clearly engraved on a metallic surface. Size, shape, and inscription style must follow legal specifications to ensure uniformity and clarity.

Types of Seals for Companies

Companies have various types of seals used, depending on the type of documents required, such as rubber stamps or embossed metallic seals. Rubber stamps are mostly used on internal and non-binding documents while metallic seals are used on authenticating official documents. Here are few types of seals used in a company: 

• Corporate Seal: A metallic seal used to authenticate an official document or transaction of the firm. It contains embossment in regards to the firm’s name, logo, and other relevant details 
• Contract Seal: A seal that represents a firm’s authority when entering into a contract with another firm 
• Invoice Seal: A seal used by a firm to verify its invoices 
• Financial seal: These are mainly used in all bank transactions that include checks issuance and the transfer of money. Typically, it is possessed by the Finance Director of the company.

Procedure to Affix Common Seal

Application of common seal is also done in a stepwise process to ensure the legality of the document. Only specific persons are allowed to use the common seal and only certain types of documents warrant the use of common seal to validate the document.

• Authorised Personnel for Affixing Seal

The common seal shall be used only by the managing director, company secretary or other board-authorised agents. This way, there would be accountability and observance of company protocol.

• Document Types Requiring Common Seal

These documents like shared certificates, deeds, and bills of exchange are required to be stamped by the common seal. A common seal usage needs a specific register to record the common seal usage history. It is used with details that ensure security and safety compliance.

Common Seal Register

 A common seal register is a statement account showing all documents that the common seal of a company has been affixed. It shall include various details and will ensure documentation and accountability in connection with the use of the company seal.

• Contents of the Register of Common Seal

Entries in the seal register concerning the date of affixation, document details signed, location of sealing along with dates should be marked. Thus, it contributes to ensuring regulatory compliance together with account ability.

• Storage Safety of Seal

Common seals shall be kept in a safe place, and commonly might be under the care of a director or company secretary. Conducted checks as well as access systems maintain safety and protect it against its improper use.

Uses of Common Seal

It is only useful for common seals to authenticate the big significant legal and corporate instruments. The following are some of the legal instruments considered valid.

• Legal and Corporate Instruments

The common seal is placed upon the documents that must be issued, such as share certificates, powers of attorney, and promissory notes. The usage of the common seal with those documents increases their credibility and binding nature.

• External and Internal Document Verification  

Common seal verifies all sorts of internal and external documents, including contracts and agreements. Hence, these become enforceable and carry legitimate power.

Alternatives to the Common Seal

With many jurisdictions, companies can now utilise the modern alternatives to the common seal. This option has more flexibility in the validation of documents.

• Digital Signature

Digital signatures have gradually become an acceptable replacement for the common seal in transactions and filings that take place digitally. This is the electronic alternative for authentication that is secure and efficient in the process of documenting.

In certain conditions, the common seal may be substituted by the signature of the company secretary particularly in intra-organisational use. Such substitution is legislatorily allowed subject to certain stipulations for the jurisdictional law concerned.

 Is Company Seal Compulsory?

The juristicly compulsory status of company seal is once again jurisdiction dependent. The post discusses its compulsoriness under the Indian jurisdiction and states that it is optional but used for better corporate dignity.

• Legal Position in India

In India, the Companies Act of 2013 has made the common seal optional for private limited company. However, many still opt to use it in order to have that added credibility and assurance in corporate dealings.

Conclusion on Company Seal

The common seal serves as a vital component in document authentication for private limited companies, adding authority and credibility to essential documents. Understanding its creation, legal requirements, and modern alternatives enables companies to make informed choices on document validation. As a traditional but optional practice, the common seal remains a respected tool in corporate governance.

FAQs on Private Limited Company Seal

What is the size of a common seal?

Standard sizes vary based on legal requirements but are usually between 35-50 mm in diameter.

Is a rubber stamp required for private limited companies?

No, rubber stamps are not legally mandatory but may be used for non-binding documentation.

Is the company seal and stamp the same?

No, a common seal is for legal documents, while a rubber stamp is for regular business use.

Is a company stamp required on letterhead?

It’s not mandatory, but companies may use it for enhanced credibility.