Companies (Amendment) Act 2017 – Common Seals

Prior to 31 March 2017, a Singapore company executing a document as a deed was required to affix the common seal of the company on the deed, in accordance with the provisions of the articles of association (or constitution) of the said Singapore company. Section 41(3)(a) of the Companies Act (prior to 31 March 2017) provided that a contract “which if made between private persons would by law be required to be in writing under seal may be made on behalf of the corporation in writing under the common seal of the corporation”. The formal execution of a deed required the affixing of the common seal, and a typical constitution of a Singapore company incorporated before 31 March 2017, would state that the common seal of the company would have to be affixed on the documents before 2 directors, a director and a company secretary, or a director and an authorized signatory.

With effect from 31 March 2017, the Companies (Amendment) Act has abolished the need for a Singapore company to have a common seal at their option, and the formal execution of a deed by a Singapore company need not require the affixation of a common seal.

The relevant provisions are found in Sections 41B and 41C of the Companies (Amendment) Act of 2017, and follows from Section 19(5) and Section 41A eliminating the requirement of a Singapore company to have a common seal. This new provision is not subject to the constitution of the Singapore company, and the existing constitution of the Singapore company is not required to be amended to remove the requirement of the company to have a common seal and/or to affix the common seal in a certain manner.

Section 41B provides that:

(1)          A company may execute a document described or expressed as a deed without affixing a common seal onto the document by signature —

(a)            on behalf of the company by a director of the company and a secretary of the company;

(b)            on behalf of the company by at least 2 directors of the company; or

(c)             on behalf of the company by a director of the company in the presence of a witness who attests the signature.

(2)           A document mentioned in subsection (1) that is signed on behalf of the company in accordance with that subsection has the same effect as if the document were executed under the common seal of the company.”

 

Moving in time with the Changes

Resolutions

It will take time for the corporate and conveyancing practice in Singapore to adapt to the change and accept that a deed need not require the affixation of the common seal. Currently, the format of resolutions as prescribed by local banks to their banking customers, typically (and probably) still reads as follows:

That the Common Seal of the Company be affixed in accordance with the Company’s Constitution to any documents that may be required to be executed by the Company under Common Seal……

Since a company may choose to have or not have a common seal, the directors of the company may decide whether or not a document may be executed with or without a common seal. However, should the directors of the company expressly resolve that the common seal of the company has to be affixed, the company will not have an alternative to execute its deeds in any other manner.

Singapore companies, lawyers and local banks should embrace the new alternative provided to them and look at amending their standard format resolutions to read or similarly to read as follows:

Every instrument, including the Deeds, shall be signed by a director of the Company and countersigned by either (i) the company secretary of the Company, or (ii) a second director of the Company, or in the presence of a witness, with or without the use of the common seal.”

 

Instruments prescribed by Singapore authorities

Whilst the changes have taken effect from 31 March 2017, the author notes that as at the date of this article, instruments as prescribed by government authorities (such as the approved forms for property registration with the Singapore Land Authority) have yet to be amended to keep pace with the changes.

 

Share certificate of Singapore company

It is poignant to note that Section 123(2) has not yet been amended to allow a share certificate to be signed in accordance with the inclusion of Section 41B. Section 123(2) states that: “Every share certificate shall be under the common seal of the company….”, and Section 123(4) states that: “If default is made in complying with this section, the company and every officer of the company who is in default shall be guilty of an offence.”

Nevertheless, the need to use common seals in the execution of share certificates has been dispensed with through the inclusion of s 41C which provides that:

Where any written law or rule of law requires any document to be under or executed under the common seal of a company, or provides for certain consequences if it is not, a document satisfies that written law or rule of law if the document is signed in the manner set out in s 41B….”.

By virtue of this provision, share certificates no longer need to be affixed with the company’s common seal, so long as they are signed on behalf of the company in accordance with s 41B.

The latest amendments to the Companies Act have not removed the option for other types of seals, such as official seals, duplicate common seals and share seals (see Summary of Feedback and MOF/ACRA’s Responses on Proposed Amendments on Annual general Meetings, Annual Returns and Common Seals). As a result, a Singapore company may still choose to issue a share certificate affixed with the company’s common seal or share seal (see Section 124).

If you have any queries pertaining to this article, please feel free to contact Ms Chan Lai Foong at chanlf@straitslaw.com.sg or the Straits Law Director who usually attends to your matters.