A share certificate is a legal document issued by an organization declaring that an individual named in such a certificate is the owner of the company’s shares as stated in the share certificate. The Company Act, 2013 made it a legal compulsion for companies to issue share certificates after completing the incorporation process.
Standard Details Enclosed in the Share Certificate
Every share certificate issued must enclose the following information:
- Name of the company issuing the certificate
- Corporate Identification Number, i.e. CIN of such Company
- Address of the registered office of a company
- Name of owners of such shares
- Number of shares to be listed on the share certificate
- Folio number of member
- An amount paid out on such shares
- Period for issuing Share Certificate
- Distinct number of the shares
The company is mandated to issue the share certificate within two months from the incorporation date. Where additional shares are allocated to the existing or new shareholders, the share certificates must be issued within two months from the date of allotment. In the case of share transfers, such certificates must be issued to transferees within one month of receipt of the instrument of transfer by the said company.
Procedure for the Issuance of Share certificates
Step 1: Board meeting and shares’ allotment
A board meeting is called for the shares’ allotment. The BODs, i.e. Board of directors, deploy a committee of directors (technically known as the allotment committee). The said committee would then be responsible for making a final decision on the share’s allotment.
As soon as the allotment committee renders its report for the allotment of shares, the Board authenticates such report and then passes the resolution to serve the purpose of shares’ allocation.
After successfull allotment, the company secretary (CS) sends allotment letters to the concerned members. The said letter is a notification for the applicant, prompting that the company has allotted the applicant’s shares.
Moreover, said letter is acknowledged as the share certificate till the company issues the final certificate.
Step 2: Register of members
The company secretary (CS) then prepares a register of a member against the list of applications received and allotment sheets.
The said register facilitates detail about the shareholders and information of the share allotted to them.
Step 3: Preparing and Printing Share Certificates
The company secretary (CS) should arrange the share certificate form as recommended by the Articles of Association (AoA).
The CS must get the said form printed together with all the relevant information as per the norms of the governing law. Further, CS must fill in all the required details in the certificate with the application register and allotment sheets. The CS should ensure that the certificate encloses the signature of the company’s two directors.
The secretary must sign the share certificate. In addition to that, the CS must ensure that the company’s seal along with the revenue stamp is affixed aptly on each of the share certificates. Lastly, a board meeting should be called to pass the resolution for issuing the share certificate.
Step 4: Notification and dispatch of Share Certificate
The CS must prompt all the shareholders that the share certificates are in the pipeline and would be dispatched in exchange for allotment letters and bankers receipts prompting payment of the allotment fees.
Public notification must be issued for the essential detail of the members. Members who opt to surrender their letter of allotments, share certificates are routed to concerned shareholders via registered post. As per their requirement, the local shareholders can secure the certificate personally from the company’s registered office or the designated agency.
Penalty for Breaching Provisions Relating to Share Certificate Issuance
Where a company commits any error in adhering to the norms relating to the issuance of share certificates, such company would be subjected to penal provision with a fine of less than Rs 25000. The said amount could be extended to Rs 500000, and every defaulter of such a company would be compelled to pay a fine not less than Rs 10000, which could further extend to Rs 100000.
Issuance of Renewed or Duplicate Share Certificate as per Companies (Share Capital and Debentures) Rules, 2014
The certificate of share(s) shall not be granted either in exchange for those which are consolidated or sub-divided or in replacement of those that are physically damaged.
- or where the pages on the recording transfer have been fully utilized, unless the share certificate in lieu of which it is granted is surrendered to the company;
- Provided that the company may charge a fee as per the Board’s recommendation, not surpassing Rs 50000 per certificate granted on consolidation or spitting of the certificate(s) or in replacement of certificate(s) in any of the events cited under governing Act, it shall be stated on the face of it & be included in the relevant register stating that the “Issued in lieu of share certificate No. …………………….. sub s divided/replaced/on consolidation” & that no fee will be payable relating to the scheme of arrangement approved by the HC or central government;
- A company may supersede all the prevailing certificates by the new ones upon sub-division or consolidation of shares or reconstitution or merger or demerger to be surrendered subject to compliance with clause (a) of sub-rule (1) of rule 5, sub-rule (2) of rule 5 and sub-rule (3) of rule 5.
- The duplicate certificate shall not be granted in replacement of those that lost or physically damaged, without Board’s permission and the payment of said fees and on such reasonable terms, such as facilitating relevant evidence & indemnity & payment of out-of-pocket expenses addressed by the company in examining the evidence produced:
Where a share certificate is granted in any of the events cited in this sub-rule, it shall be cited on the face of it and be recorded in the relevant register, that it is “duplicate issued in lieu of share certificate No. ……………………………” and the term “duplicate” will be stamped on the face of such certificate.
- In the case of unlisted entities, the duplicate share certificates shall be granted within a timeline of three months; meanwhile, in the case of listed entities, said certificate will be granted within 45 days from the submission date of complete documents with the company respectively.
- The details of share certificates granted in pursuant to sub-rules (1) and (2) will be entered in a Register of Duplicate, or renewed share certificates maintained in form No.SH.2 reflecting against the person’s name to whom the certificate is issued, the number and date of issuance of the certificate in replacement of which the new share certificate is granted, And the relevant changes reflected in the Register of Members by legit cross-references in the “Remarks” column.
- The register must be kept at the company’s registered office or at such place where the members’ register is kept, and it shall be maintained permanently. It shall be held in the CS’s custody or any other board-authorized person.
- All entries recorded in the Register of Duplicate or renewed Share Certificates shall be approved by the CS or such other individual as may be authorized by the Board’s members to seal and authorize the certificate under the provisions of sub-rule (3) of rule 5.
Conclusion
A company is a legal establishment representing a group of individual, whether natural, legal or a mixture of both, with a common goal. Company members serve a common goal and work in synergy to accomplish pre-determined objectives. A company rolls out shares for members which means that they such part in the company. Technically, members are also known as shareholders[1]. Since these shares are transferable, they can be transfer in the manner mentioned above.
Read our article:Issue of Duplicate Share Certificate: Step by Step Procedure
