Affixing of the Company Seal and the Effect of the Statutory Assumption in the Corporations Law

Courts are divided on the important question of the effect of the statutory assumption in the Corporations Law dealing with affixing the company seal on documents. While some courts have made a distinction between formal authority (that is, demonstrating that the company's assent to the transaction is in proper form) and substantive authority (that is, demonstrating that the company has authorised the transaction in question), other courts have not. Some courts infer that all that is required for a company to be bound by a sealed document is for the statutory assumption of due sealing to apply. The issue is important for determining whether a company is bound by a sealed document. The authors argue that the statutory due sealing assumption relates only to formal authority and not substantive authority. They examine the case law in the area, the statutory provisions regarding the company seal (and their history) as well as policy considerations, and conclude that those seeking to enforce a sealed document can rely on the statutory assumption of due sealing for formal authority but not substantive authority.