Company Seals: Why You Should Retain Them

The Company Seal functions as a symbolic signature for a company, also known as the “Corporate Seal,” affirming that a deed represents the company in its artificial personhood. The practice of affixing the Company Seal to execute documents is based on the understanding that, as an artificial entity, the company relies on representation by its agents, who are not always perpetually authorized. Therefore, allowing the company to have self-representation, at least in certain instances, is considered appropriate.

In Kenya, this was the norm until the advent of COVID, making non-essential engagements impractical. On March 18, 2020, the Business Laws (Amendment) Act No.1 of 2020 was enacted, amending, among other things, Section 35 of the Companies Act, 2015. This amendment eliminated the statutory requirement for companies to use the seal when entering into agreements.

Although regulations do not definitively require a Company Seal, specific organizations may still mandate it internally, as per their Articles of Association. This leaves management with no alternative but to use the seal.

Opportunities

Save time: The previous requirement caused inefficiencies, especially during the pandemic, as documents needed to be affixed in the presence of at least two directors and the Company Secretaries.

Save costs: Ensuring the presence of three individuals was challenging, considering the varying schedules of directors.

Inspire innovation: Despite legal changes, the corporate world still values the seal, leading to the development of electronic Company Seals.

Ability to monetize the seal: The seal, as intellectual property, represents the corporate personality and can be strategically used to enhance the company’s brand.

Risks of not using the seal

Impersonation: While copying the seal is challenging, duplicating a director’s signature is easier.

Directors acting ultra vires: Directors, as company representatives, may misuse their authority in violation of their powers.

Unknown exposures: Without the use of the seal, evaluating the extent of exposure in agreements becomes challenging if directors do not disclose their representative rights.

Cross-jurisdictional compliance: Engaging with parties outside the jurisdiction may result in non-compliance with international regulatory standards.

Erosion of the company’s institution: The Seal signifies the company’s powers and its unique identity, promoting ease of doing business.

While the removal of the sealing requirement is welcomed for simplifying business processes, there is value in preserving this tradition in the ever-evolving corporate environment. It is my view that it is the management’s role to safeguard the tradition of using the seal as an asset of the company.

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