Common Seal – To have or not to have?


As you may already be aware, with effect from 31 March 2017, it is no longer a mandatory requirement for companies incorporated in Singapore to affix common seal while executing legal documents such as share certificates, transfer instruments, proxy forms, legal agreements etc.

Prior to 31 March 2017, to execute a document as a deed, your Company would be required to affix its common seal onto the signing page along with the execution clause, "SIGNED, SEALED and DELIVERED".

Although it is no longer mandatory to affix common seal on legal documents, you might wish to note that there are companies who chose to adopt a common seal or retain the use of common seal. Why?

Rationale for Retaining Common Seal

Generally, the use of common seal represents official approval given by the company, and that the document is confirmed to be valid and legal binding. Other important reasons for the use of common seal include:

1.    International Business

While many countries have dispensed with the mandatory use of common seal, they are still many jurisdictions which still require the affixation of common seal on documents. Hence, if your Company conducts or intends to conduct business transactions internationally, it would be preferable to adopt or retain your Company’s common seal.

2.    Authenticity

A signature can be easily applied electronically, while a company stamp can be easily forged and imitated. By affixing a common seal, it is a sign of showing that the document is the official copy. This ensures that there are no forged or tampered copies. Hence, if your Company wishes to reduce the risk of forgery or tampering a document of high importance, it would be best to affix a common seal to the document.

3.    Requirement under Constitution

It might be a mandatory requirement under the existing constitution of a company to execute documents under common seal and that there is no other alternative for execution in any other manner. If your Company’s existing Constitution has such a provision or your Company adopted the Model Constitution under the Companies (Model Constitutions) Regulations 2015, you may wish to review and amend the existing Constitution by passing a special resolution to dispense with this requirement for execution of documents.

Section 41A (1) of the Companies Act 1967 provides that “A company may have a common seal but need not have one.” With this provision, affixing common seal becomes an option, and the requirement to have a common seal is not removed.

If your Company decides to adopt a common seal, do note that it should be adopted by way of a Board resolution, and usually in the First Board Resolution or Board Meeting of the Company.

The impression of the common seal should be made part of the First Board Resolution or Board Meeting of your Company in which it was adopted.

Using Common Seal

When affixing the common seal, it must be first authorised by the Board of Directors or a committee authorised by the Board of Directors e.g. Seal Committee by way of a Board resolution.

The common seal is affixed in the manner as prescribed in your Company’s Constitution. Typically, it is required to be affixed in the presence of (i) two directors; or (ii) a director and the company secretary; or (iii) a director and any other person as the Board of Directors may authorise for the purpose.

As the use of common seal represents official approval given by your Company, you should ensure that Board approval is obtained prior to the affixation of common seal. This can be done via a Board resolution, which sets out a description of the document and authority given to the authorised persons to affix the common seal on the said document.

It is good practice to maintain a Register of Sealings where your Company can record the details of each instance whereby the common seal is affixed, although this is not a statutory requirement.

Last but not least…

Do note that the Companies Act has not removed the option for other types of seals such as official seal for use aboard, duplicate common seal and share seal.

Section 124 of the Companies Act 1967 stipulates that a company may, if authorised by its constitution, have a duplicate common seal which must be a facsimile of the common seal of the company with the addition on its face of the words “Share Seal”.

If your Company adopts other types of seals other than common seal, such seal(s) must be approved by the Board by passing a Board resolution.

Remember - when affixing the common seal, there is a legal obligation on the part of your Company and the persons authorised to affix the common seal. Hence, make sure that the common seal is affixed in accordance with the Constitution of your Company.

 


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