Share Certificate

February 18, 2023

This article has been written by Pallavi Jindal, a student of NEF Law College, Guwahati

INTRODUCTION:

According to Section 2(84) of the Companies Act, 2013 share means share in the share capital of the company including stocks. Share capital means the funds that a company raises in exchange for issuing an ownership interest in the company in the form of shares. There are two kinds of share capital. They are as follows:

Preference Share Capital: Preference share capital means when the funds are raised by issuing preference share. Here the preference shareholder receives dividend before ordinary shares but which have no voting rights.
Equity Share Capital: Equity share capital means when the funds are raised by the company by issuing equity shares to the equity shareholders. Here the equity shareholders are entitled to vote on the resolutions of the company and are eligible for the ownership in the company.

A share certificate is a document issued by the company to its members which specifies the number of shares to be held by him and the amount paid on each share. It is a type of evidence which proves the ownership of shares of the person mentioned in the certificate or the document issued by the company. According to the Companies Act, 2013 it is mandatory for a company to issue share certificate to the company. According to Section 46(1) of the Companies Act, 2013 share certificate means A certificate, [issued under the common seal, if any, of the company or signed by two directors or by a director and the Company Secretary, wherever the company has appointed a Company Secretary], specifying the shares held by any person, shall be prima facie evidence of the title of the person to such shares.

PROVISIONS OF SHARE CERTIFICATE UNDER COMPANIES ACT, 2013:

Section 46 of the Companies Act, 2013 deals with certificate of shares

Certificate of Shares (Section 46): (1) A certificate, 1 [issued under the common seal, if any, of the company or signed by two directors or by a director and the Company Secretary, wherever the company has appointed a Company Secretary], specifying the shares held by any person, shall be prima facie evidence of the title of the person to such shares.

(2) A duplicate certificate of shares may be issued, if such certificate —

(a) is proved to have been lost or destroyed; or

(b) has been defaced, mutilated or torn and is surrendered to the company.

(3) Notwithstanding anything contained in the articles of a company, the manner of issue of a certificate of shares or the duplicate thereof, the form of such certificate, the particulars to be entered in the register of members and other matters shall be such as may be prescribed.

(4) Where a share is held in depository form, the record of the depository is the prima facie evidence of the interest of the beneficial owner.

(5) If a company with intent to defraud issues a duplicate certificate of shares, the company shall be punishable with fine which shall not be less than five times the face value of the shares involved in the issue of the duplicate certificate but which may extend to ten times the face value of such shares or rupees ten crores whichever is higher and every officer of the company who is in default shall be liable for action under section 447.

TIME PERIOD FOR ISSUING OF CERTIFICATE OF SHARES:

Section 56(4) of the Companies Act, 2013 deals with the time period for issuing of share certificate by the company to its members.

It states that Every company shall, unless prohibited by any provision of law or any order of Court, Tribunal or other authority, deliver the certificates of all securities allotted, transferred or transmitted—

(a) within a period of two months from the date of incorporation, in the case of subscribers to the memorandum;

(b) within a period of two months from the date of allotment, in the case of any allotment of any of its shares;

(c) within a period of one month from the date of receipt by the company of the instrument of transfer under sub-section (1) or, as the case may be, of the intimation of transmission under subsection (2), in the case of a transfer or transmission of securities;

(d) within a period of six months from the date of allotment in the case of any allotment of debenture.

Provided that where the securities are dealt with in a depository, the company shall intimate the details of allotment of securities to depository immediately on allotment of such securities.

SIGNIFICANCE OF SHARE CERTIFICATE:

A certificate of shares is evidence to the effect that the allottee is holding a certain number of shares of the company showing their nominal and paid-up value and distinctive number. This certificate is a prima facie evidence of title to the shares in possession of shareholders as referred in the case of “ Society Generale De Paris v. Walker, (1885) 11A AC 20, 29”.

Share certificate is the only documentary evidence of title and the share certificate is a declaration by the company that the person in whose name the certificate is issued is a shareholder in the company as referred in the case of “ Ghanshyam Chhaturbhuj v. Industrial Ceramics (Pvt) Ltd. (1995) 4 Com LJ 51” .

CASES REFERRED:

Shri Shripad Raghunath Pathare vs Dahisar Darshan Chs Ltd on 13 August, 2018: In this case the Respondent No. 1 i.e the society denied duplicate share certificate to the appellants even after the order passed by the Deputy registrar co-op. societies. Then the appellant filed an appeal in the District Forum where it was held that the appellant is entitled for a duplicate share certificate as his original certificate was lost and he is also entitled for the compensation of Rs.50,000 for deficiency in service and mental harassment by the respondent along with the litigation cost of Rs.10,000.
Bahla and San Francisco Rly. Co., (1868) LR 3 QB 584: In this case it was held that the person whose name is mentioned in the share certificate issued by the company may recover compensation for the damages suffered by him. The measure of damage is the valu of the shares at the time of the refusal by the company to identify him as the shareholder along with the interest from that date.

REFERRENCES:

Aishwarya Says:

Law students often face problems, which they cannot share with their friends and families. We have started a column on our website Student’s Corner. In this column we are talking to several law students about the challenges that they face. Students who are interested in participating in the same, can fill this Google Form.

IF YOU ARE INTERESTED IN PARTICIPATING IN THE SAME, DO LET ME KNOW.

The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

If you would also like to contribute to my website, then do share your articles or poems to aishwarya@aishwaryasandeep.com

Join our Whatsapp Group for latest Job Opening

February 18, 2023