This article has been written by Ms.Taranjot Kaur, a 1st year law student of Panjab University,Chandigarh.
Introduction
Share Certificate is a document issued by the company to their members who have purchased the shares. The name of the member is written on the certificate explaining the ownership of a number of shares. Moreover, under section 2(84) of the Companies Act, 2013, a share is a share in the share capital of the company including stocks.
As per section 46 of the Companies Act, 2013 “a share certificate is 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”.It refers to a document which is issued by a company evidencing that a person named in such certificate is the owner of the shares of the Company as stated in the share certificate. The Indian Companies Act mandates companies for issuing share certificates post their incorporation.In a layman language, a share certificate is a document issued by the director of the company with the common seal to its member for subscribing the company’s shares. It explains the ownership of a number of shares a member purchased from the company.
Procedure for Issue of Share Certificate
A share certificate should specify the share and the amount of paid-up capital it relates to. Further, the share certificate must be signed by a minimum of two Directors of the company or by a Director and a company secretary. The signature of the Director can be affixed with a digital signature or printed by means of a machine, equipment or other mechanical means such as engraving in metal or lithography. However, affixing Directors Signature by means of a rubber stamp is not allowed.In case a common seal is placed on the share certificate, it must be affixed in the presence of the person who signed the share certificate. However, it is no longer required to affix the common seal of the company and is optional.
When a share certificate issued?
A share certificate is issued after the company is incorporated and the capital is received from the shareholders.There is a time frame allotted to the companies within which the certificates are supposed to be issued.It should be issued within two months of the incorporation of the company.The time limit, in the case of transfer of the shares, is one month. Certificates should be issued within a month after receiving the instrument of transfer.
Stamp Duty
According to the Stamp Act of the State/Union, stamp duty is a requirement. The amount of duty to be paid on the share certificate depends on the rate mentioned in the Stamp Act schedule.Duplicate share certificates are issued if the previous certificate is lost or destroyed, if it is surrendered by the company or if it is damaged in any way. [Rule 6 of the Companies (Share Capital and Debentures) Rules, 2014]The company’s secretary maintains all the renewed and duplicate share certificates. These shares should be issued within 3 months of submitting all the documents.
Face Value of Share Certificate
The face value of shares written on the certificate shall be as per the Memorandum of Association and Articles of Association of the company. The Unlisted shares on any of the stock exchanges should have a nominal value of Rs 1 or Rs 10 or Rs 100 or Rs 1000 as per the requirements of the promoters.
Details to be provided in a Share Certificate
Every share certificate issued in India should contain the below mentioned:
Name of issuing Company
CIN no. (Corporate Identification Number) of such Company
Address of the company’s registered office
Name of owners of such shares
Folio number of member
Number of shares which is represented by such share certificate
An amount which is paid on such shares
Distinct number of the shares
Timeline for Share certificate
Time limit for issuing Share Certificate in case of allotment or transfer –
According to section 53(4) of the Companies Act 2013, the company shall deliver the share certificates on account of allotment or transfer –
Within 2 months of the period from the date of allotment in case of allotment of shares or in case the member are subscribers of Memorandum of Association then within 2 months of the period from the date of incorporation, in case of share transfer within 1 month of the period from the date of receipt of the instrument of transfer with the relevant document within a period of 1 month in case of transmission
Time limit to issue a Duplicate Share Certificate –
In case, of a lost certificate, a duplicate share certificate shall be issued on the following conditions –
Prior consent of the Board of Director is required by means of resolution
With or without payment of a fee not exceeding a fee of more than Rs 50/-
On reasonable terms like furnishing of FIR, lodged with the police as a supporting evidence that the applicant will bear the loss sustained on account of the lost certificate and shall return the certificate if the same is found out.
Payment will be out of pocket expenses incurred by the company on an investigation for tracing the lost certificate in case.
On the share of Share certificate, it shall be printed or stamped as Duplicate Issued in lieu of Share certificate number.
Time limit for delivering Share certificate in case of allotment, Transfer, and Transmission –
According to section 53(4) of the Companies Act 2013, the company shall deliver the share certificates on account of allotment or transfer –
Within 2 months of period from date of allotment in case of allotment of shares or
Within 2 months of the period from the date of incorporation, in case the member are subscribers of Memorandum of Association
in case of share transfer, within 1 month from the date of receipt of the instrument of transfer with the relevant document
in case of transmission within a period of 1 month
Time limit for issuing Duplicate Share Certificate
In a listed company, the certificate shall be issued within 15 days from the date of submission of the documents.
In an unlisted company, the duplicate share certificate shall be issued within 3 months from the date of submission of documents.
Procedures for issuing Share Certificates
Board Meeting & Allotment of shares
A board meeting is called for deciding about the allotment of shares. The board of directors assigns a committee of directors known as the allotment committee. The allotment committee would then decide about the allotment of shares.
Once the allotment committee provides its report with respect to the allotment of shares, the Board then approves such report and then passes the resolution for allotting shares to the respective applicants. Once shares are allotted by the allotment committee, the company secretary sends the letters of allotment to the respective members. The allotment letter refers to a letter that notifies the applicant that the company has allotted a certain number of shares to him. This letter of allotment is considered as the share certificate till the issuance of the final certificate.
Register of members
The company secretary then prepares a Register of members from the lists of applications received and allotment sheets. Register of member provides information about the shareholders and details of the shares which are allotted to them.
Preparing and Printing Share Certificates
The company secretary must arrange the form of the share certificate according to the form suggested by the Articles of Association. The secretary must get the form printed together with all the required details as per the provisions of the governing law. The secretary needs to fill in all the details in the share certificate with help of the application register and allotment sheets.
The secretary also needs to ensure that the share certificate is signed by two directors of the company. The secretary needs to sign the share certificate. The secretary also needs to ensure that the company’s seal and revenue stamp is affixed on each of the share certificates. Once certificates are in order, a board meeting is called for passing the resolution for issuing share certificates.
Intimation and dispatch of Share Certificate
The company secretary needs to inform all the shareholders that share certificates are ready and would be delivered in exchange of allotment letters and bankers receipt confirming payment of the allotment money. Public notice should be issued for the general information of the members. Members who surrender their allotment letters, share certificate are dispatched by the registered post to them. The local shareholders as per their preference can also collect the share certificates personally from company’s registered office or from agency appointed for dispatching the share certificates.
Conclusion –
Share certificate serves as an important document for shareholders to prove ownership in a company. Share certificate must be issued by a company after incorporation to its shareholders on receipt of money for capital. Further, in case of issue of additional shares or transfer of shares, share certificates are again issued by the company. A share certificate is issued after the company is incorporated and the capital is received from the shareholders.It should be issued within two months of the incorporation of the company. Any company making any default in complying the provisions relating to the issue of share certificates,would be punishable with a fine that does not exceed Rs 25000 but could extend up to Rs 50,000 and every officer in default of such company shall be punishable with a fine less than Rs 10,000 but could not extend to Rs 1, 00,000.
References –
https://taxguru.in/company-law/share-certificate-companies-act2013.html
https://www.indiafilings.com/learn/share-certificate/
https://cleartax.in/s/share-certificate
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