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Common Seal

 
Q1.

Are there any provisions under the new Companies Ordinance (Cap. 622) (“the new CO”) to facilitate starting a business in Hong Kong?

 
Q2.

For an existing company which has a common seal, what should be done to cancel its seal if it decides not to keep a common seal?

 
Q3.

After the commencement of the new CO, can companies still keep or adopt and use their common seals?

 
Q4.

If a common seal is kept by my company, does it mean that my company must execute documents under its common seal?

 
Q5.

If a common seal is not kept, how could a company make a contract that would be required by law to be in writing and under seal?

 
Q6.

If a common seal is not kept, how could a company execute a document as a deed?

 
Q7.

Pursuant to the provisions of the Conveyancing and Property Ordinance (Cap. 219) (“the CPO”), an assignment, a charge/mortgage or other disposal of legal estate in land has to be made by deed. Does a deed executed in accordance with sections 127(3) and 128(1) of the new CO without using a seal satisfy the relevant requirement for a deed under the CPO?

 
Q8.

If a company has adopted regulation 114 (relating to common seal) of Table A in the First Schedule to the old Companies Ordinance (Cap. 32) as an article, is it necessary for the company to amend the article before it may execute a document without a common seal?

 
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Q1.

Are there any provisions under the new Companies Ordinance (Cap. 622) (“the new CO”) to facilitate starting a business in Hong Kong?

 
Answer:

Yes. The new CO simplifies the procedures for starting a business in Hong Kong by, for example, abolishing the requirement for companies to have a memorandum of association as a constitutional document and prescribing Model Articles for adoption by different types of companies incorporated under the new CO (please see the FAQs on Abolition of Memorandum of Association and Matters relating to Company Articles). The mode of execution of documents by a company has also been simplified by making the keeping and the use of a common seal optional (section 124(1)).

 
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Q2.

For an existing company which has a common seal, what should be done to cancel its seal if it decides not to keep a common seal?

 
Answer:

There is no specific provision in the new CO or the Companies (Model Articles) Notice (Cap. 622H) on any procedural requirement for a company to adopt or cancel its common seal. The procedures for adopting or cancelling a common seal is a matter for the company to decide, having regard to the applicable provisions in its articles and the usual practice and procedures for adoption or cancellation of a common seal.

 
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Q3.

After the commencement of the new CO, can companies still keep or adopt and use their common seals?

 
Answer:

Yes. The new CO gives flexibility to companies and allows companies, whether existing companies or companies incorporated under the new CO, to keep or adopt and use their common seals, though the requirement is no longer mandatory.

 
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Q4.

If a common seal is kept by my company, does it mean that my company must execute documents under its common seal?

 
Answer:

No. Even if a company keeps a common seal, a company may choose to execute a document whether under its common seal or not in accordance with section 127 of the new CO.


Section 127(1) provides that a company may execute a document under its common seal. If a company chooses to execute a document under its common seal, the seal must be affixed in accordance with the provisions of its articles (section 127(2)).


However, a company may also execute a document in the manner as set out in section 127(3). Please see the answer to Q5 below for details.

 
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Q5.

If a common seal is not kept, how could a company make a contract that would be required by law to be in writing and under seal?

 
Answer:

Pursuant to section 121(2)(b) of the new CO, the contract may be made by the company in writing executed in accordance with section 127(3) and expressed to be executed by the company.


Section 127(3) provides that a company may execute a document in the following manner –

 
(a) in the case of a company with only one director, by having it signed by the director on the company’s behalf; or
(b) in the case of a company with 2 or more directors, by having it signed on the company’s behalf by –
 
(i) the 2 directors or any 2 of the directors; or
(ii) any of the directors and the company secretary of the company.
Section 127(5) further provides that a document signed in accordance with section 127(3) and expressed to be executed by the company has effect as if the document had been executed under the company’s common seal.
 
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Q6.

If a common seal is not kept, how could a company execute a document as a deed?

 
Answer:

Pursuant to section 128(1) of the new CO, a company may, without using a seal, execute a document as a deed by executing it in accordance with section 127(3); having it expressed to be executed by the company as a deed; and delivering it as a deed. Please see the answer to Q5 above as to the mode of execution under section 127(3).

 
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Q7.

Pursuant to the provisions of the Conveyancing and Property Ordinance (Cap. 219) (“the CPO”), an assignment, a charge/mortgage or other disposal of legal estate in land has to be made by deed. Does a deed executed in accordance with sections 127(3) and 128(1) of the new CO without using a seal satisfy the relevant requirement for a deed under the CPO?

 
Answer:

A deed executed by a company without using a seal and by having it signed in accordance with section 127(3) of the new CO; having it expressed to be executed by the company as a deed; and delivering it as a deed satisfies the requirement for a deed under the CPO.

 
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Q8.

If a company has adopted regulation 114 (relating to common seal) of Table A in the First Schedule to the old Companies Ordinance (Cap. 32) as an article, is it necessary for the company to amend the article before it may execute a document without a common seal?

 
Answer:

It is quite usual for existing companies to adopt regulation 114 of Table A in the First Schedule to the old Companies Ordinance (Cap. 32) in respect of the use of common seal. Regulation 114 provides that “The directors shall provide for the safe custody of the seal, which shall only be used by the authority of the directors or of a committee of the directors authorized by the directors in that behalf, and every instrument to which the seal shall be affixed shall be signed by a director and shall be countersigned by the secretary or by a second director or by some other person appointed by the directors for the purpose.”.


Where an article is in the form of regulation 114 providing for the manner in which the common seal shall be affixed, the company may rely on sections 127(3) and (5) of the new CO to execute a document without a common seal even without amending the article, since section 127(3) provides a company with a common seal an alternative method of executing documents.


As different forms of articles relating to the use of common seal or execution of documents may be adopted by companies, a company should seek independent legal or other professional advice in case of doubt.

 
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