Company Common Seals: Do Companies Still Need to Use Them?
By Adrian, Compliance and Governance Officer at Corpus Globe Corporate Solutions (CGCSo)
The traditional company common seal has historically been an important symbol of corporate authority. Documents executed under a seal were regarded as formal acts of the company. However, the practical importance of the physical seal has changed.
Under the Companies Act No. 10 of 2017, (the “Act”) the common seal has not been abolished. Rather, the Act adopts a more flexible approach, a company is required to have a common seal, but it does not have to use the seal every time it executes a document.
Although the Act permits alternative methods of execution, where the common seal is used, its affixing must be authenticated in accordance with section 32 and the company’s articles.”
Can a company execute documents without a Seal?
Section 32 expressly permits a company to execute a document or deed without affixing its common seal. A document or deed may be validly executed by or on behalf of a company by:
• by affixing the company’s common seal; or
• by signing the document with the signatures of two authorised signatories; or
• by the signature of a director whose signature is attested by a witness.
Importantly, the Act states that a document signed in accordance with these alternative methods has the same effect as if it had been executed under the company’s common seal. This is an important development in practical corporate administration.
Why does the Seal still matter?
If a company can execute documents without using its seal, a reasonable question is why does the Act still require a company to have one?
The continued requirement for a common seal means that the seal remains a legally recognised method of corporate execution. The fact that the Act permits alternative methods does not remove the seal from the company’s corporate framework. Accordingly, companies should maintain and control their common seals in accordance with the Act and their articles, even where the seal is not used for every transaction.
In practice, particular counterparties, financing institutions or transaction documents may also require execution under seal as part of their contractual or internal requirements
Can a Company Common Seal be kept in electronic form?
The Act also accommodates technological developments. Section 32 provides that a seal may be kept in electronic form in accordance with the relevant electronic-transactions legislation. This provision is particularly relevant in an increasingly digital business environment. It demonstrates that the legislation does not equate a company’s seal with a traditional physical form.
The Act also provides for a common seal for use outside Zambia. Subject to the company’s articles, a company may have a separate seal stating on its face the country in which it is to be used. This may be particularly relevant where a Zambian company enters into transactions or executes documents in another jurisdiction
The Common Seal remains legally relevant, but it is no longer the only route to valid corporate execution.
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