What is Common Seal in Australia?
17/05/2019 — by Will Elton
What is common seal ?
A common seal, also called company seal or corporate seal is physical illustration emboss with company name and Business number of association or business.
Common seal was historically used to seal contracts, deeds and share certificates, to make them valid.
A company in Australia may have Common seal with company’s name and Australia company number (ACN).
Execution of Common seal in Australia
The Act does not prescribe how documents must be executed by companies without a seal. However, Section 127(1) of the Act provides that a company may execute a document without using 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.
Common uses of company seals include
- Significant contracts (i.e. not the purchase of a roll of stamps)
- Real (landed) property transfers and land contracts
- Loan documents, mortgages and guarantees
- Occasions where its use is required by a third party
Is common seal or company seal mandatory in Australia?
Prior 1988, common seals were mandatory in Australia, Only documents/ deeds with common seal were considered valid. So in a sense it was compulsory then. The Company law Review ACT 1988 abolished common seal.
Regardless, companies today still use common seal as it give more legitimacy to document for people unfamiliar with the Australian way of document execution.
What Federal Registration of legislation says about Company seal ?
Company may have common seal
(1) A company may have a common seal. If a company does have a common seal, the company must set out on it:
(a) for a company that has its ACN in its name—the company’s name; or
(b) otherwise—the company’s name and either:
(i) the expression “Australian Company Number” and the company’s ACN; or
(ii) if the last 9 digits of the company’s ABN are the same, and in the same order, as the last 9 digits of its ACN—the expression “Australian Business Number” and the company’s ABN.
Note 1: A company may make contracts and execute documents without using a seal (see sections 126 and 127).
Note 2: For abbreviations that can be used on a seal, see section 149.
(2) A company may have a duplicate common seal. The duplicate must be a copy of the common seal with the words “duplicate seal”, “share seal” or “certificate seal” added.
(3) A person must not use, or authorise the use of, a seal that purports to be the common seal of a company or a duplicate if the seal does not comply with the requirements set out in subsection (1) or (2).
(4) An offence based on subsection (3) is an offence of strict liability.
Note: For strict liability, see section 6.1 of the Criminal Code.