In the evolving legal landscape of corporate regulation in the Maldives, a notable inconsistency has emerged: many government authorities, financial institutions, and private entities continue to request company seals on applications and official documents — despite the fact that the legal requirement to maintain and use a company seal was repealed under the new Companies Act of 2023.
This article explores the implications of this shift in law, whether such requests are enforceable, and how this issue aligns with global corporate practices.
The Historical Requirement: Companies Act 1996
Under the now-repealed Companies Act of 1996, Article 42 explicitly required all registered companies to have a company seal. It was to be used on all official documents, particularly those relating to corporate approvals, contracts, and filings. Over the years, the affixing of a company seal became a ritualistic part of formalising business documents in the Maldives.
This approach mirrored an older common law tradition, where the company seal (or “common seal”) served as the corporate equivalent of a signature — indicating the company’s intention to be legally bound.
The New Legal Framework: Companies Act 2023
However, the introduction of the Companies Act 2023 marked a modernising shift. In line with international trends, the new law no longer mandates the use of company seals. The rationale is clear: corporate legal systems around the world are increasingly recognising authorised signatures and resolutions as sufficient evidence of corporate intent and approval, rendering the seal obsolete.
The Maldives Companies Act 2023 reflects this modern view, making the use of a seal purely optional. Companies are free to maintain and use a seal if they choose, but they are under no legal obligation to do so.
Can Authorities or Banks Still Demand a Seal?
Despite the legislative reform, many companies continue to encounter government departments, banks, and other institutions that insist on a company seal as part of routine documentation. This raises a key legal question: can a public or private body enforce a requirement that is not supported by current law?
The short answer is no — not in the context of legal enforcement. If the law does not require a seal, no authority or institution can lawfully reject an application or document solely on the basis that it lacks a company seal. To do so would effectively amount to imposing an extra-legal requirement on businesses, which may be unlawful and challengeable under administrative law principles.
That said, banks and institutions do have the discretion to set their own internal policies for risk management or documentation. For example, a bank may request a company seal as part of its due diligence process when opening a corporate account. While not unlawful per se, these requests must be balanced against the current legal framework and should not be treated as universally mandatory.
International Comparison
Globally, the trend is overwhelmingly toward abolishing the mandatory use of company seals. In jurisdictions such as the United Kingdom, Australia, Singapore, and the United States, company seals are either optional or virtually extinct in practice. Corporate authority is typically exercised through board resolutions, director signatures, or digital authorisation systems.
In the UK, for instance, the Companies Act 2006 permits the execution of documents with or without a seal. The signature of two directors, or one director and a witness, is considered sufficient. This approach prioritises efficiency and reduces administrative burdens — especially in an increasingly digital business environment.
Recommendations for Companies and Institutions
- For Companies: If you are operating under the Companies Act 2023, you are under no obligation to use a company seal. You may politely clarify this legal position if requested to provide one.
- For Authorities and Banks: Internal policies should be updated to reflect the legal changes brought about by the 2023 Act. Refusing documents solely for lacking a seal may amount to administrative overreach and could be subject to legal challenge.
- For Regulators: It may be timely for the Registrar of Companies or Ministry of Economic Development to issue a public circular or guidance note clarifying the optional nature of company seals under the new Act, to ensure consistent practice across all sectors.
The repeal of the mandatory seal requirement under the Maldives Companies Act 2023 represents a step toward legal modernisation and alignment with international standards. While old habits and institutional inertia persist, companies cannot be compelled to meet requirements that no longer exist in law. As such, all stakeholders — both public and private — must ensure their practices are updated and legally compliant to support a more efficient and modern business environment.