What is a common seal and do you need it?
7 minute read
Documents, seals, and company chops are there to protect the interests of a business and the business owners over the course of a business’s lifetime.
However, one cannot render legal documents or contracts if there is no company seal and signature. This is a fairly common occurrence in a business, even when the transaction in mind is a simple one.
So, what would your business need to render contracts and documents in Hong Kong? Would a common seal be enough?
Let’s take a look and find out more.
In Hong Kong, a company common seal (also known as the corporate seal or a company seal) makes business documents official and legally binding. As such, these documents act as the official voice or signature of a business.
The common seal is recognized and used by businesses that are under the Common Law Jurisdictions. Aside from Hong Kong, the Common Law is also practiced in Canada, Australia, New Zealand, India, and the United Kingdom.
Common seal vs company chop
A company chop is the corporation’s rubber stamp. This is something that stems from the days of colonialists and imperialists. The term chop has colonial Indian English roots, and is thus unique to only a few jurisdictions – Hong Kong included.
However, a company chop is not as important as a common seal as it is possible to simply use your own signature in place of a company chop. Both thus work the same way and have the same legal weight.
However, keep in mind that company chops become more important in Mainland China as they are typically registered with the government. This is why entrepreneurs who do more business with Mainland China (or come from the Mainland) always request for a company chop.
It may seem like company chops are obsolete and have no use, but they can be useful as proof of intention for legal relations. Hence, having one may be a good idea for your business in Hong Kong.
Uses of the common seal
A Hong Kong common seal is used to stamp all important documents or contracts and it signifies that they are certified by the company’s board of directors (or sole director), decision-makers, or higher-up executives.
The common (company) seal is stamped on documents that include share certificates, employee contracts, minutes of a meeting, and other vendor partner agreements.
Do all companies in Hong Kong require a common seal?
Using a company common seal for Hong Kong businesses is no longer a mandatory rule for businesses incorporated in Hong Kong.
The Hong Kong law stipulates that Hong Kong companies are no longer required to have a common seal in order to execute documents and business processes. The new Hong Kong Companies Ordinance, effective 3 March 2014, states that Hong Kong companies now have the flexibility to either use their common seals or not.
As a business owner, one can decide whether or not to use a common seal. A company can either use it or cancel it. There are no rules in the latest Companies Ordinance that specify procedural requirements as to what to do with the company seal in Hong Kong.
When a company decides to keep and use the seal, there are no mandatory requirements that indicate that they have to use the seal when rendering documents.
If a company wants to render documents using the company common seal in Hong Kong, they have to do so in accordance with the requirements laid down in Section 127(2) of the Companies Ordinance.
If a company chooses not to use the common seal, it needs to follow the rules set out in Section 127(3) of the Companies Ordinance. This means that the company needs to have the document executed as a deed by the company and delivered as a deed!
Authorizing common seals
Since the new Ordinance in Hong Kong made the corporate seal optional, a business can choose whether or not to use them.
If a company chooses to use a seal, it has to make sure that the company seal is metallic with the company name legibly engraved. The metallic seal has to be applied in accordance with the company’s Articles of Association.
According to Section 127 (the Hong Kong Companies Ordinance), businesses are allowed to render a document under their common seal. If they decide not to use a company seal, they may render and execute documents with:
- Only one director’s official signature
- Signatures by two directors (or more)
- Official signature by the company secretary
The process of applying
The common seal needs to be designed first. The process of applying takes around five business days and it can be delivered to your company office.
The cost of applying
A corporate seal costs HK$400 while common seal stickers cost HK$100 for ten pieces.
A business will most likely have to cover local mediator fees that can amount to HK$50. However, it may be possible to collect these personally.
Frequently asked questions (FAQs)
Let’s go through some questions many people struggle to understand when it comes to company seals.
How can a company cancel its corporate seal if they decide it no longer needs it?
There is no specific line regarding this issue in the new Companies Ordinance (CO). No information regarding procedural requirements has to be met by a company to adopt or cancel its common seal.
The procedure for adopting or canceling a company seal is a matter for the company to decide.
This should be done with the company’s regulations and procedures in mind. The government has no say and there are no laws that require a company to notify the authorities if they want to stop using their seal.
Are companies allowed to keep their common seals now that there is a new CO?
The new Companies Ordinance allows companies to keep or adopt and use their common seals. There is no law that makes the corporate seal mandatory, but there is also no law that can stop companies from using their common seals.
If my business keeps its common seal, does that mean that it has to render documents under the company’s common seal?
No, a business is not required to use the company’s common seal if it does not want to. Even if a business keeps its seal, the executives can choose whether or not they want to render documents using the common seal.
However, as mentioned, there are specific rules stipulated in Section 127 of the new Companies Ordinance. Therefore, there are rules to keep in mind when rendering documents using the seal as well as when executing documents without the common seal.
How can Sleek help?
While a company common seal in Hong Kong is optional, Sleek can provide your business with its common seal if you choose to have one.
When you subscribe to our secretary services package, you will be able to place your order for a common seal. Stickers can also be added to this package.
A common seal previously had used legal significance when doing business as a Hong Kong company.
It used to make business documents official and legally significant. However, it is no longer mandatory to have and use one on a document.
The amendments to the CO were made in 2014, and some companies have stopped using their seals altogether.
But if your business wants to have and use its own seal, it can certainly do so. For more information, feel free to contact Sleek!