A common seal is a company signature that your company can use in certain circumstances to execute documents. This article sets out what a common seal is, and when and why you might use one.

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.

When to Use a Common Seal

Common seals are not always required. Generally, companies with constitutions established before 1988 still require a common seal. Unless the company’s constitution has been updated since 1988, 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. If a company has many overseas clients, it may choose to execute documents with a common seal to show legality and validity.

If your company does have a common seal, its use should be restricted. This is because its use must be authorised by a board resolution. It is not necessary to use the common seal for everyday business, 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.

Your company’s general counsel or legal officer should record all uses of the common seal in a register. The register should contain a record of the use of the common seal, together with a cross-reference to the board minutes authorising its use.

When May a Company Execute a Document Without a Common Seal?

A company may execute a document without a common seal if the document is signed by:

  • two directors of the company;
  • a director and secretary of the company; and
  • for a proprietary company that has a sole director who is also the sole company secretary – that director.

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 approval of the board of directors. As a result, it should only be used in select circumstances. In addition, you should properly record the use of your common seal in a register. If you have any questions about your company’s common seal, get in touch with LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

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