Summary
- A common seal is a rubber stamp or digital equivalent carrying the words “common seal” along with the company’s name and ACN (or ABN where applicable), and is equivalent to a company’s signature for executing formal documents.
- Most companies are not legally required to have a common seal, but those with constitutions established before 1988 that have not been updated must use one, and many companies choose to use a seal to demonstrate legitimacy to overseas clients unfamiliar with Australian execution requirements.
- Where a common seal is used, it must be affixed in the presence of two directors, a director and company secretary, or a sole director who is also the sole company secretary of a proprietary company, following a board resolution authorising its use for the specific transaction.
- This article is a guide to common seals for companies in Australia, explaining what a common seal is, when it is required, and the procedural requirements for its use under the Corporations Act 2001 (Cth).
- LegalVision is a commercial law firm that specialises in advising clients on corporate governance and commercial contracts.
Tips for Businesses
Store your common seal securely and restrict its use to significant transactions such as major contracts, property transfers, and loan documents. Obtain a board resolution authorising use of the seal for each specific transaction before affixing it. Maintain a register recording each use of the common seal to ensure proper governance and accountability.
A common seal is a form of company signature that can be used to execute certain legal documents, but many businesses are unsure when it is required and how to use it correctly. Understanding the rules around common seals is important for any company that executes significant contracts or dealings with overseas parties. This article explains what a common seal is and how it is used to execute commercial legal documents.
What is a Common Seal?
Corporations law provides that a company may have a common seal to execute documents. A common seal (also referred to as a company seal or corporate seal) is a rubber stamp carrying the words “common seal” together with the following information:
- the company’s name;
- the words “Australian Company Number” (ACN); and
- the company’s ACN; or
- if the last nine digits of the company’s ABN are the same and in the same order as the last nine digits of its ACN, the words “Australian Business Number” and the company’s ABN.
If the company has its Australian Company Number (ACN) as its name, the common seal will only need to include the company’s ACN.
A company may also have a duplicate common seal if necessary. The duplicate common seal must be a copy of the common seal with the words “duplicate seal”, “share seal”, or “certificate seal”.
The common seal is equivalent to a person’s signature. As a result, it is important to protect it. If your company possesses a company seal, ensure that you store it in a safe and secure place.
Using a Common Seal
In most cases, companies do not need a common seal. However, if a company established its constitution before 1988 and has not updated it since then, the company must follow the rules set out in the constitution and use a common seal.
Regardless of the law, many companies choose to use a common seal. A common seal may give more legitimacy to documents, particularly from the perspective of people unfamiliar with the Australian requirements for document execution. A company with many overseas clients may execute documents with a common seal to show legality and validity.
If your company has a common seal, you must restrict its use. Using the common seal for everyday business is unnecessary, like signing off on meeting minutes. It may be appropriate to use a common seal in the following circumstances:
- significant contracts for major purchases;
- real property transfers and land contracts; and
- loan documents, mortgages and guarantees.
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How Do You Execute a Common Seal?
You must follow specific procedural requirements if your company uses its common seal. The company should ideally have a board resolution authorising the seal’s use for the specific document or transaction. The affixing of the seal itself must then be carried out by authorised persons and appropriately witnessed.
According to Section 127 of the Corporations Act 2001, typical requirements include affixing the seal in the presence of either:
- two directors of the company;
- a director and secretary of the company; or
- for a proprietary company with a sole director who is also the sole company secretary.
Alternatives to Physical Common Seals
Although physical rubber stamps are an accepted method for a company’s common seal, many companies and organisations have opted for modern digital alternatives. Electronic signature solutions enable authorised parties, such as directors and secretaries, to securely apply their signatures to documents electronically.
These digital alternatives offer a secure way to create an encrypted digital imprint or image file that includes all the necessary elements of a physical common seal, such as the company name, ACN, ABN, and the phrase ‘common seal’. You can affix the digital seal file to electronic documents that require execution.
If you are a company director, complying with directors’ duties are core to adhering to corporate governance laws.
This guide will help you understand the directors’ duties that apply to you within the Australian corporate law framework.
Key Takeaways
A common seal is a rubber stamp carrying the words “common seal” and the name and business number of the business. A company does not need to have a common seal. However, if your company has one, its use requires the board of directors’ approval. As a result, it should only be used in select circumstances. In addition, you should adequately record the use of your common seal in a register.
If you need help with your company’s common seal, LegalVision provides ongoing legal support for all businesses through our fixed-fee legal membership. Our experienced contract lawyers help businesses manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 1300 544 755 or visit our membership page.
Frequently Asked Questions
A common seal (a company or corporate seal) is a rubber stamp carrying the words “common seal” with the company’s name, ACN and ABN.
Generally, companies with constitutions established before 1988 still require a common seal.
A company may execute a document without a common seal if the document is signed by two directors, a director and the company’s secretary, or if there is only one director, that director.
A common seal must include the company name, the words “Australian Company Number,” and the company’s ACN. If the last nine digits of the ABN match the ACN, the ABN may be used instead.
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