To Seal or Not to Seal

"So far as the question of putting up of the seal of the Company is concerned, it is a relic of the days when medieval barons, who could not read or write, used their rings to make a characteristic impress,” stated India’s Supreme Court as recently as 2006.

When a company is incorporated, it obtains a legal identity. It can sue and be sued, has perpetual succession (as opposed to physical persons that die), and can acquire, hold, and sell property. The company seal is the equivalent to a person’s signature, allowing company representatives to act on behalf of the company. This all sounds good. Otherwise, people might commit fraud in the company’s name, right?

The problem is: in many places, it does not work. Entrepreneurs from Ghana to Vietnam agree: seals can easily be forged, which undercuts their original purpose.

Not surprisingly, about 20 years ago, the UK where the common seal originated made its use optional. Documents can be signed on behalf of the company either by two authorized signatories or by a director of the company in the presence of a witness who attests the signature. Less than half of the 178 countries covered in the Doing Business report require a company seal.

Chances are that if half of the world does not need it, there is a better way of doing things.