The Ministry of Corporate Affairs has vide an amendment to the Companies Act, 2013 done away with the mandatory requirement of a common seal for a company. The Government has issued a Companies (Amendment) Bill, 2015 which has been notified on 26th May, 2015.
Section 9 of the Act has been amended to delete the requirement of having a common seal for a company.
However a company may if it desires keep a common seal. If it does have a common seal, then it should have its name engraved in the common seal in legible characters.
Section 22(2) of the Act has been amended to add a proviso that
where the company does not have a common seal, then the authorisation under this sub-section shall be made by two directors or by a director and company secretary, wherever the company has appointed a company secretary.
The authorisation mentioned in section 22(2) where the company does have a company seal, should be in writing and it can authorise any person generally or in respect of any specified matters, as its attorney to execute other deeds on its behalf either in India or outside India.
So if the company does have a common seal, then it has powers to empower any person in writing to execute the documents under the common seal of the company, but if the company does not have a common seal then only two directors of the company or one director and the company secretary where the company has appointed a company secretary can be so authorised.
So it makes sense for a company to have a common seal especially a large company with diverse operations whereas a small company having limited operations and more in the nature of family business can dispense with the requirement of a common seal.
This is an initiative of the government under the “ease of doing business” procedure in order to mitigate the hardships for companies operating in India.