What a common seal is and whether your company needs one

A common seal is a stamp that a company can press onto a document to execute it, like a giant rubber-stamp version of the company's own signature. It is optional under Australian law: companies have not been required to hold one since 1 July 1998, and most documents are now signed by directors instead of sealed. The real question for most small businesses is not whether to buy a stamp, but whether their own constitution or a counterparty actually requires one.

This article covers:

• what a common seal is and where the requirement came from
• whether your company is legally required to have one
• what the seal must show if you do have one
• how documents are executed with and without a seal
• why signature-only execution is usually enough
• the common misconceptions that cause companies to get execution wrong

What a common seal is

A common seal is a physical stamp that carries the company's name and its identifying number. When a document is executed, the seal is pressed onto it, usually in ink, and the fixing of the seal is witnessed by the people the law names. A document stamped with the company's common seal is treated as the company's own act, equivalent to the company signing it.

The seal has a long history. Before 1998, every Australian company was required to have a common seal, and formal documents such as deeds and property transfers had to be executed under it. That changed when the Company Law Review Act 1998 (Cth) commenced on 1 July 1998 and removed the requirement. The current position is set out in s 123 of the Corporations Act 2001 (Cth), which says simply that a company may have a common seal. The small business guide at the start of the Act puts it plainly: a company is not required to have a common seal.

Today, most companies never order one. When a company is registered, the registration paperwork typically asks whether a seal is wanted, and many businesses simply say no.

Is a common seal legally required?

No. Since the Company Law Review Act 1998 (Cth) removed the requirement, s 127 of the Corporations Act 2001 (Cth) has given companies two equally valid ways to execute documents: signing them, or sealing them. Execution by signature is the default in practice, and no law, regulator or court requires a seal for a company to enter a binding contract.

There is one important qualification, and it comes from your own company's constitution. Under s 140 of the Corporations Act 2001 (Cth), a constitution operates as a contract between the company, its members and its officers. Constitutions written before 1998 were drafted when a seal was compulsory, and many still contain a clause along the lines of "the company shall have a common seal" or require deeds to be executed under seal. If your constitution still carries that clause, the company should comply with it. The practical choices are to use a seal, or to remove the clause by special resolution under s 136 of the Corporations Act 2001 (Cth).

Because a person dealing with the company is entitled to assume its constitution has been complied with (s 129(1)), an outdated seal clause rarely lets a counterparty walk away from a deal. But it can create friction at settlement, and it exposes the company to internal arguments about whether a document was validly executed. It is worth checking the clause before your next significant signing, not after.

What your seal must show if you have one

If your company does have a common seal, s 123(1) of the Corporations Act 2001 (Cth) prescribes what must appear on it:

• Company name: the seal must set out the company's name.
• Identification number: if the company's name does not itself contain the ACN, the seal must show either the expression "Australian Company Number" followed by the company's ACN, or the expression "Australian Business Number" followed by the ABN, but only where the last 9 digits of the ABN are the same, and in the same order, as the last 9 digits of the ACN.

Every Australian company has an ACN, so the ABN alternative is not a substitute for companies that "have no ACN". In practice the two numbers usually match anyway, because a company's ABN is derived from its ACN.

Two further points from s 123 are easy to miss. A duplicate seal must include the words "duplicate seal", "share seal" or "certificate seal". And it is an offence, one of strict liability, to use a seal that purports to be the company's common seal but does not comply with the content rules. A badly made seal is therefore not just a cosmetic problem, so it is worth ordering one from a reputable stamp maker with the correct details.

How documents are executed with and without a seal

The mechanics of execution sit in s 127 of the Corporations Act 2001 (Cth).

Without a seal

A company may execute a document if it is signed by two directors, or by one director and one company secretary. A proprietary company with a sole director may have that director sign alone, provided the director is also the sole company secretary or the company has no company secretary. These are the same combinations whether the document is an ordinary contract or a deed.

With a seal

A company that has a common seal may execute a document by fixing the seal to it, with the fixing witnessed by the same combinations: two directors, or a director and a company secretary, or the sole director of a proprietary company in the circumstances just described. Since the technology-neutral signing changes, the witnessing can even be done by electronic means (s 127(2A)).

Deeds

A document takes effect as a deed if it is expressed to be executed as a deed and is executed under s 127(1) or (2). A deed executed by signature under s 127(1) does not need to be witnessed at all, may be signed electronically, and does not need separate delivery. In other words, the seal is not what makes a document a deed. The document must say it is a deed; the seal, if used, is just one method of executing it.

Other methods

Execution by seal or by the s 127 signatories is not the whole story. Under s 126, an individual acting with the company's express or implied authority can execute documents on its behalf without a seal, which is how a general manager or other authorised officer commonly signs routine contracts. And s 127(4) makes clear the section does not limit other ways a company may execute a document, so the constitution may set out its own method.

Why signature-only execution is usually enough

Third parties are protected when a company signs rather than seals. Under s 129 of the Corporations Act 2001 (Cth), a person dealing with a company may assume a document has been duly executed if it appears to have been signed in accordance with s 127(1), and may make the equivalent assumption where the seal appears to have been fixed and witnessed in accordance with s 127(2). Banks, landlords, suppliers and customers can all rely on these assumptions, which is why a seal is not needed to make a signature-based execution "count".

Government registries take the same approach. For example, NSW Land Registry Services publishes execution examples for companies signing dealings without a seal, so buying or selling land does not require one either.

The main situation where a seal still earns its keep is cross-border work. In Mainland China, company chops remain mandatory for many official procedures, and in Hong Kong the common seal requirement was abolished under the Companies Ordinance (Cap 622) but stamps are still widely used. An Australian company dealing with overseas counterparts may be asked to produce a stamped document, and a seal or company chop can smooth that process. That is a commercial decision, not a legal one: Australian law does not require the seal, and if a foreign party insists, an ordinary rubber stamp usually satisfies the request.

A common seal in practice

Suppose Harbourline Fit-Out Pty Ltd, a two-director company, is buying a small warehouse and giving the bank a guarantee for a business loan. Maya and Tom are the directors; Tom is also the company secretary. The company's constitution was adopted in 2019 and contains no seal clause.

The bank's standard guarantee is expressed to be executed as a deed. Maya and Tom both sign it, and because it is expressed to be a deed and signed under s 127(1), it takes effect as one. No seal is pressed, and no separate witness is needed. For the warehouse, the contract is signed by both directors, and the transfer is executed as a deed and lodged with the NSW land registry, which accepts execution under s 127 without a seal.

Now suppose the vendor's solicitor sends a requisition asking whether the company has a common seal, because the vendor's internal policy prefers sealed documents. The company has three options. It can point to s 127 and the land registry's execution guidance and decline. It can agree to use a seal as a matter of commercial courtesy, which costs tens of dollars for a stamp. Or, if its constitution had turned out to contain an old seal clause, it could either use the seal or amend the constitution by special resolution. The lesson of the example is that the legal position is settled, and the seal question is usually a matter of paperwork, preference and the terms of the particular deal.

Common misconceptions about common seals

A handful of misunderstandings about seals keep causing execution errors in practice:

• "The law requires a common seal": Not since 1 July 1998. The requirement was removed by the Company Law Review Act 1998 (Cth), and s 123 now makes a seal optional.
• "A document is not a deed unless it is sealed": A document is a deed when it is expressed to be executed as a deed and executed under s 127(1) or (2). Signature-only deeds are valid, need no witness and can be signed electronically.
• "The seal must show the ABN if the company has no ACN": Every Australian company has an ACN. The seal must show the company's name and the ACN, with the ABN allowed only as an alternative where its last 9 digits match the ACN.
• "An old constitution automatically forces you to use a seal": Only if the constitution actually contains a clause requiring one. Check the actual document rather than assuming based on when the company was registered. If the clause is there, comply with it or remove it by special resolution.
• "A seal makes documents more secure or harder to forge": Seals can be duplicated or forged, particularly simple designs. The legal protection that counterparties enjoy comes from the assumptions in s 129, not from the physical stamp itself.

Getting help with seals and execution

A lawyer's help is most useful at the edges of this area, rather than for the seal itself. A practitioner can review your constitution and identify an outdated execution clause before it causes trouble, and can draft and pass the special resolution to modernise it. Where a document must be a deed, or where a foreign counterparty insists on a seal or chop, a lawyer can advise on the safest execution method and the wording that makes the document take effect as intended. For property purchases, conveyancers and solicitors know the land registry requirements that apply in each state. And if a document has already been signed incorrectly, for example by only one director, a lawyer can advise whether the execution can be cured or ratified and what the counterparty can validly rely on.

Check your constitution before your next big signing

The decision most companies face is not whether to buy a stamp. It is whether their own constitution still carries a clause from an era when seals were compulsory. Before your next significant contract, loan guarantee or property purchase, pull out your constitution and read the execution clause. If it requires a seal, order one or amend the constitution by special resolution. If it does not, director signatures under s 127 are all you need, and a counterparty who insists on a seal is making a commercial request, not stating a legal requirement. The misstep that costs the most is discovering an outdated seal clause at settlement, when the documents are already in front of you and the other side is asking questions. Five minutes with your constitution now avoids that conversation entirely.