Corporate Seal Example: Everything You Need To Know
It is a form of embossed symbol or ink that contains the legal name of a corporation, its jurisdiction of incorporation, and/or the word “seal.”3 min read
A corporate seal example is a form of embossed symbol or ink that contains the legal name of a corporation, its jurisdiction of incorporation, and/or the word “seal.”
Under Alberta (the Business Corporations Act), a contract becomes binding whether the contracting parties affix a corporate seal or not. However, the bylaws of a corporation may stipulate instances where the corporate seal must be affixed on contracts.
How Corporations Use Company Seals
Corporate seals are used by nonprofit corporations, LLPs (limited liability partnerships), LPs ( limited partnerships), LLCs (limited liability companies), S corporations, and C corporations to emboss documents and mark them as authentic official company documents.
Some companies often use their company seal to stamp documents such as company resolutions, ownership certificates, company contracts and minutes from the annual meeting of shareholders and directors or that of managers/members for LLCs, LLPs or LPs.
The seal was first used in China to represent the emperor's authority in official documents. This tradition survives to this day, and the company seal/stamp is used as an instrument to represent the company's authority in various transactions.
Types of Corporate Seals
Owing to the multitude of transactions done by a company, they may have different seals — each one used for particular actions or in specific instances.
The following are the different kinds of corporate seals.
Company seals show the company's full name and serve as its corporate signature. Since it is mostly used to authorize documents and transactions, the company seal is one of the most important seals. Generally, if the company seal is embossed on a document, it means that the company accepts whatever clauses the document may contain and therefore, is legally bound by the terms of the document. Due to its significance, it carries a potentially greater amount of risk.
Financial seals are used in basic corporate actions such as issuing checks and opening bank accounts. Since it is mostly used to authorize financial transactions, it is often placed in the custody of the Company's Director of Finance or the officer in charge of financial matters.
Legal Representative Seal
This is a personal seal that represents the company's legal representative although it symbolizes company behavior, not the individual conduct of the legal representative. It is often used with the company's financial seal to open bank accounts. The bank views the legal representative seal as evidence of authorization for bank-related activities.
Contract seals are used to represent the company's authority and person when entering into contracts with other entities. Nonetheless, the contract seal isn't really necessary since the company seal can be used in its stead. However, it's best to use the contract seal, especially in cases where several contracts require affirmation. Constantly relying on the bearer of the company's seal could cause difficulties.
This seal is used to authorize invoices that the company issues.
Other types of corporate seals include the HR seal and the customs seal.
Corporate seals are used by companies in several scenarios and carry specific powers. As such, they are sources of significant risks especially for companies without a full understanding of its legal and business implications.
Some of the outside sources of risks to corporate seals include forgery and fraud. Since the corporate seal carries significant powers, it is not uncommon for unscrupulous individuals to attempt their forgery.
In many ways, the forgery of a company seal is similar to forging a director's signature. The risk comes into play during correspondence with other entities since one party presumes that the other is legitimate.
For instance, an entity may receive a sealed and signed offer stating that it will receive products upon payment of a stipulated amount to the counterparty. However, the party, whose name is on the signed and sealed offer, has been falsely represented and has no idea of the terms of the agreement.
There are also internal sources of risks to company seals — for instance, the company's employees or agents. This problem arises from a failure to implement a proper control system that effectively supervises the individuals who have access to the corporate seal.
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