Share Certificate- Meaning And Procedure To Issue

Your heard of the term Share Certificate while incorporating your private limited company, lets do deep dive and understand what a share certificate is and the uses for share certificate

What is a share certificate?
A share certificate is a certificate issued to the members by the company under its common seal specifying the number of shares held by him and the amount paid on each share.

According to Section 45 of the Companies Act, 2013 each share of the share capital of the company shall be distinguished with a distinct number for its individual identification. However, such distinction shall not be required, as per proviso to Section 45, if the shares are held by a person whose name is entered as the holder of a beneficial interest in such share in the records of a depository.

In terms of Section 46(1) of the Act, a certificate under the common seal of the company is prima facie evidence of the title of the person to the shares specified therein. The certificate is the only documentary evidence of title in the possession of the shareholder. But it is not a warranty of title by the company issuing it.

Once a company registration is completed its compulsory to issue share certificates

When can a company issue a Duplicate Share Certificate?
Section 46 (2) states that 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.

What is the Procedure for the issue of shares certificates?

• Pass board resolution
• Letter of offer surrendered to company
  if the letter is lost or destroyed the board may impose reasonable terms
• Certificate shall be issued in Form No. SH-1 and shall specify the name of person in whose favour the certificate is issued
• The certificate shall be signed by –Two directors duly authorized by the board if the composition of board permits at least one of the aforesaid two directors shall be a person other than managing or whole time director
  The secretary or any person
  authorized by the board
  Particulars of shares certificates to be
  entered in the Register of Members.

What is prescribed relating to the issue of share certificates?

(a) Certificate of shares (where shares are not in demat form)[ (Rule 5(1)]-

(1) Where a company issues any share capital, no certificate of any share or shares held in the company
shall be issued, except-
(a) in pursuance of a resolution passed by the Board; and
(b) on surrender to the company of the letter of allotment or fractional coupons of requisite value, save in cases of issues against letters of acceptance or of renunciation, or in cases of issue of bonus shares:
If, the letter of allotment is lost or destroyed, the Board may impose such reasonable terms, if any, as to seek supporting evidence and indemnity and the payment of out-of-pocket expenses incurred by the company in
investigating the evidence, as it may think fit.

(b) Share Certificate Format [Rule 5(2)]
Every certificate of share or shares shall be in Form No. SH.1 or as near thereto as possible and shall specify the name(s) of the person(s) in whose favor the certificate is issued, the shares to which it relates and the amount paid-up thereon.

Details to be provided in a share certificate

Every share certificate issued in India should contain the below mentioned:

1. Name of issuing Company
2. CIN no. (Corporate Identification Number) of such Company
3. Address of the company’s registered office
4. Name of owners of such shares
5. Folio number of member
6. Number of shares which is represented by such share certificate
7. An amount which is paid on such shares
8. Distinct number of the shares

Time of issue of Certificate of Securities
Under Section 56(4) of the Act, every company, (unless prohibited by any provision of law or any order of any Court, Tribunal or other authority) must 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 or, as the case may be, of the intimation of transmission, 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 the debenture.

However, 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. [See proviso to Section 56(4)].

PENALTY FOR NON-COMPLAINCE

Where any default is made in complying with the above provisions, the company shall be punishable with fine which shall not be less than Rs 25,000 but which may extend to Rs 5 lakh and every officer of the company who is in default shall be punishable with fine which shall not be less than Rs 10,000 but which may extend to `1,00,000. [Section 56(6)]

In case of any help or assistance in Share certificate issuance, contact Virtual auditor support team on 9962 260 333/044- 48560333 /mail us [email protected], our team will guide through the entire process and help you comply