CHANGES REGARDING THE USE OF A COMPANY SEAL IN BUSINESS ACTIVITY

April, 2017

In March 2017, the Verkhovna Rada of Ukraine adopted Law of Ukraine no. 1982-VIII “On Amendments to Certain Legislative Acts of Ukraine regarding the use of seals by legal entities and sole proprietors” (hereinafter referred to the Law), which was published on April 19, 2017, and which shall enter into force three months after its publication – namely on July 19, 2017. The Law establishes a new level of relations between business entities with both state bodies and local authorities. According to the Law, amendments have been made, in particular, to the Civil Code of Ukraine, the Economic Code of Ukraine, the Commercial Procedural Code of Ukraine, the Code of Administrative Offenses, and several other legal acts. A landmark innovation here is the introduction of administrative liability for representatives of public bodies or local authorities to illegally demand the use of a seal on any document or for their refusal to accept documents without any seal impression. By the time the above-mentioned Law enters into effect with regards to legally regulating the use of seals, the provisions of existing law continue to apply, according to which companies reserve the use a seal in their own business activities, but is no longer an obligation. As suggested in Part 1 of Article 581 of the Commercial Code of Ukraine, a business entity may use a seal; moreover, it does not need to obtain any permit documents to manufacture such a seal, as previously. It is not mandatory for legal entities to affix a seal in legal transactions, including commercial contracts and power of attorney. However, according to Part 3 of Art. 207 of the Civil Code of Ukraine, obligatory use of seal can be determined by written agreement between the parties. In order to eliminate any doubt about the order and the necessity of business entities to further use a seal and the necessity of doing so, the Ministry of Justice has tried to clarify this question by issuing Letter no. 265-0-2-15 / 8.1 dated April 9, 2015, in which the Ministry states that a business entity’s decision about whether or not to use seals should be guided by the company’s charter, which is the main constituent document regulating the latter’s activities. Thus, when it comes to legal entity, including a business entity, in case of need to address the issue of obligatory use of seal on the documents, you should apply the provisions of the company’s charter, which must be secured provisions for mandatory use of seals.

With the cancellation of obligatory use of seals it is important in establishing and maintaining business relationships between contractors is to check the signatory authorities to commit specific transactions. In addition to asking for constituent documents of a contractor it is useful to also request the card with signatory authorities. The importance of this stage is due to the fact that cancellation of obligatory use of seals results in need of taking additional measurements when checking signatory authorities of a contractor. As notarization of documents is not always possible and / or economically reasonable, the entity has to rely on its counterparties acting in good faith and monitor them on a regular basis. In case if a business entity decides to cease use of seal in its activities further on such cease should be duly documented.

In case if constituent documents of the legal entity contained provisions regarding obligatory use of a company’s seal in business activities of the latter then respective amendments to constituent documents should be made in order to comply with the legislation. After carrying out relevant procedures with regards to the state registration of aforementioned amendments the next stage should be arranging duly documents flow, which can be achieved by in particular issuance of an order regarding cease of use of a seal.

Author: Iryna Kabachna

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2017-07-07T08:48:30+00:00 03.04.17|Legal practice|