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28 September 2009
It is a long-established rule that a Cypriot company must have a corporate seal, which must be kept at the company's registered office under the custody of the company secretary as directed by the board of directors. Despite the Company Law (Cap 113) imposing no compulsory obligation on companies to have a corporate seal and the company registrar making no such requirement, such obligation is implied from other provisions in the Company Law and Table A.
There used to be two schools of thought on whether the common seal should be engraved or be in the form of a rubber stamp. The Company Law was silent on this issue until July 2009, when a new amendment to the law clarified the position by providing a definition of a company's 'common seal', stating that a "common seal also includes a stamp which does not produce any engraved prints".
The requirement for a Cypriot company to have a common seal is further reinforced by the provisions of Section 33(1)(a) of the Company Law (which was also amended in July 2009), which provides that any contracts that are required by law to be made under seal according to English law must be made in writing and either be affixed with the company's common seal or have it omitted.
The most important July 2009 amendment regarding corporate seals was the new Section 35, which completely replaced the previous provisions of Section 35 and now provides that any document signed on behalf of a Cypriot company, in Cyprus or abroad, by any person acting under the company's expressed or implied authority shall have the same effect as if it were executed under the company's common seal. This new provision clearly abolishes the need to affix the company's common seal in order to render an agreement as executed by deed or otherwise valid under the laws of any jurisdiction that may govern that agreement.
However, it is anticipated that even though the new amendment is an innovation in Cypriot law, it may cause problems of interpretation when it comes to proving an 'implied' authority; this will certainly depend on the circumstances of each case. Undoubtedly, this will give rise to a series of precedents based on acceptable commercial practices and behaviours.
The new Section 35 further provides that in the event of a Cypriot company electing to use its corporate seal, such seal must be used in accordance with the provisions of the company's articles of association or in accordance with Table A as applicable.
For the majority of companies, their articles of association (or Table A) provide how the corporate seal should be affixed. The standard wording is that when affixed, it should be countersigned by at least two directors and/or a director and the company secretary. If there is no provision in the company's articles of association, Regulation 113 of Table A of the Company Law shall apply, which 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."
Until July 2009, the law (ie, the old Section 35) provided that:
"a company may, by writing under its common seal, empower any person, either generally or in respect of any specified matters, as its attorney, to execute deeds abroad on its behalf in any place not situate in the Republic."
However, the new law, in light of the changes stated above, will eliminate the extensive use of powers of attorney for the execution of agreements on behalf of a company as they will no longer be required.
These innovative new changes have been welcomed in the legal and business sectors as they have simplified procedures when acting for and on behalf of Cypriot companies, thus rendering them more popular and more likely to be used in international corporate structures and restructurings.
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