Section 46(1) of the Companies Act, 2013, provides that a share certificate is a certificate issued by the company under its common seal or signed by two Directors or by a Director and the Company Secretary of the company stating the shares held by any person shall be proof of the title of the person to the shares mentioned therein. In the case of a share held in depository form, the record of the depository is the proof of the interest of the beneficial owner.
TIME LIMIT FOR ISSUING SHARE CERTIFICATES:
- In case of Incorporation: Share Certificate shall be issued to the subscriber of Memorandum within two months from the date of Incorporation of a company.
- In the case of Allotment: Share Certificate shall be issued within two months from the date of allotment of shares.
- In case of Transfer: Share Certificate shall be issued within one month from the date of receipt of the document of the transfer by the Company.
DETAILS TO BE MENTIONED IN A SHARE CERTIFICATE :
- Share Certificate shall be issued in form SH-I or any document that is similar to SH-I.
- If a company has a common seal then the Share Certificate shall be under the Common Seal of the Company.
- It shall state the Name of the owner of the shares.
- It shall state the Number of Shares it is related to.
- It shall state the amount paid on the Shares.
- It shall state the Distinctive Number of Shares.
- It shall state the Number of the Share Certificate.
- It shall state the Folio number of the Member.
- It shall issue the name of the issuing Company
- It shall mention the Corporate Identification Number (CIN) of the Company
- It shall provide the Registered Office Address of the Company.
- It shall state the face value of the shares.
- It shall state whether the face value of shares is fully paid or partly paid
- It shall state the date of issue of the share certificate
- It shall contain the Signature of the Directors and the Secretary
PROCEDURE FOR ISSUING SHARE CERTIFICATES:
The Companies (Share Capital and Debentures) Rules, 2014 also referred to as “Rules” states the mandatory conditions to be fulfilled before issuing a share certificate. The following is the procedure for issuing shares:
- A Board meeting of the company is called to form a small Allotment committee of Directors to decide the allotment of shares. This committee shall submit a report to the Board which if approved by the Board it will pass the resolution for allotment of shares to the applicants.
- When such a resolution is passed, the letters for allotment of shares stating the allotted number of shares are dispatched to the members. However, these letters are given only for a temporary basis until the original share certificates are issued by the company.
- A Register of Members is made by the Company Secretary from the lists of application received and allotment sheets. The Register specifies the details of shareholders and shares allotted to them.
- Rule 5 of the Rules provides that a share certificate shall be issued only on the pursuance of a Board resolution and after the surrender of the letter of allotment.
- Rule 5 of the rules allowed the management of the company to issue a share certificate in a format similar to Form No. SH.1 prescribed by the rules.
- The share certificate so drafted is signed by the two Directors and a Company Secretary or any other person so authorized. It is also attested to the Company’s Seal and Revenue stamp.
- Once the share certificates are ready, the Company Secretary shall inform the shareholder and the share certificate shall be given in exchange for the allotment letter and banker’s receipt for payment of allotment money. The Company shall also issue a public notice for the general information of the members.
PENALTY FOR BREACH:
If a company fails to comply with the provisions relating to the issue of share certificates, such a company would be punishable with a fine of Rupees 25,000 to Rupees 5,00,000, and the defaulting officer of the company would face a fine of Rupees 10,000 to Rupees 1,00,000.
Indian Stamp Act provides that on issuing a share certificate, a Company has to pay Stamp Duty to the Collector of Stamps/Treasure Officer/Revenue authorities of the State.
DUPLICATE SHARE CERTIFICATE:
A duplicate certificate of shares may be issued by a company to a shareholder if he proves that the original certificate has been lost or destroyed or has been accidentally defaced, mutilated, or torn by him and is surrendered back to the company.
PROCEDURE FOR ISSUING DUPLICATE SHARE CERTIFICATE:
- When a share certificate is lost by the shareholder he must, first of all, inform the company about the lost or misplaced certificate along with its details to the company through a letter or email.
- On receiving such information the company shall first stop the transfer for 30 days to prevent any fraud or illegal transfer and then inform the shareholder about the process of issue of duplicate share certificate.
- After this, the shareholder has to make an Affidavit and Indemnity Bond Agreement on a Non-Judicial Stamp Paper. He should also file an F.I.R with the police giving all the details of the lost share certificate. An advertisement should be also published in a newspaper about the lost share certificate.
- The shareholder shall apply to the company for issuing a duplicate share certificate with the necessary documents. Before issuing the duplicate share certificate. The consent of the Board of Members of the company shall be taken before issuing the duplicate share certificate
- After issuing a duplicate share certificate, an entry should be made in the Register of Renewed and Duplicate Share Certificate made for this purpose. A Duplicate share certificate should have a line stating that a Duplicate share certificate has been issued in place of share certificate number so and so.
TIME LIMIT FOR ISSUING DUPLICATE SHARE CERTIFICATES:
In the case of unlisted companies, the duplicate certificate shall be issued within 3 months and in the case of listed companies within 45 days from the date of submission of all the documents to the company.
A share warrant is a document of a title as the holder of the share warrant is entitled to the shares mentioned therein. It is a bearer document of title of the holder to the shares issued by the company under its common seal. Registration of Share Warrant is not required. It can be issued only by a public limited company and only against fully paid up shares. A public company that is limited by shares is allowed to convert its fully paid-up shares into share warrants. The issue of a share warrant by a company is not mandatory. In case a Public company wishes to issue share warrants then not only the Articles of the company must provide for the issue of share warrants but also the approval of the Central Government has to be taken. Generally, the person holding the share warrant is not a member of the company unless provided by the Articles of Association of the company.
After issuing the share warrant, the company must strike out the member’s name in its Register of Members as if he has ceased to be a member and shall enter in that register the following details:
- The truth that the share warrant is issued;
- The statement of the shares mentioned in the warrant, distinguishing each share by its number;
- The date on which the warrant is issued.
As a share warrant is negotiable in nature and mere delivery of the share warrant transfers the ownership of the shares. Each warrant has a coupon attached to it stating the dates on which the dividend will be paid by the company. The person providing the appropriate coupon can receive payment of the dividend.
CONDITIONS FOR ISSUING SHARE WARRANTS:
- Only a public company has a right to issue share warrants
- The shares shall be fully paid up
- The issue of share warrants shall be allowed by the Articles of the company.
- The approval of the Central Government shall be taken for issuing a share warrant.
- The share warrants shall be issued by the company under its common seal.
DISTINCTION BETWEEN SHARE CERTIFICATE AND SHARE WARRANT:
|SHARE CERTIFICATE||SHARE WARRANT|
|1.||A share certificate is a registered document proving title to share issued under its common seal by the company.||A share warrant is a document that bears the title to shares that are issued under its common seal by the company.|
|2.||Both private and public companies are authorized to issue a share certificate.||Only Public limited companies are authorized to issue Share Warrants.|
|3.||Share Certificate can be issued for both, fully paid shares and partly paid shares.||Share warrants can be issued only for fully paid-up shares|
|4.||It is not a Negotiable document.||It is a Negotiable document.|
|5.||For the transfer of share certificate registration has to be done.||Share warrant can be transferred by mere delivery of it|
|6.||The dividend is paid through a dividend warrant.||The dividend is paid through bearer warrant coupons that are attached to the share warrant.|
|7.||When a share certificate is lost, a duplicate share certificate is issued in its place.||When a share warrant is lost, a duplicate share warrant is not issued.|
|8.||A company at first has to issue share certificates.||After collecting the amount the shareholder wants, the company can issue share warrants against the share certificate.|
|9.||Stamp duty has to be paid for transferring shares specified in the share certificate.||No stamp duty is required to be paid for transferring share warrant.|
|10.||A company can issue a Share certificate without prior approval of the Central Government.||A company cannot issue a Share Warrant without taking approval of the Central Government.|
|11.||For issuing a share certificate only a Nominal Stamp Duty is required to be paid.||For issuing a share warrant heavy Stamp Duty is required to be paid.|
|12.||The person holding the share certificate has all membership rights.||The person holding the share warrant is not given all membership rights by the Articles of a company as he is not a registered member of the company.|
|13.||In the Articles of the company a provision to issue share, certificates are not required.||Articles of a company must have a provision for the issue of share warrants.|
|14.||The name of the person holding the share certificate is specified in the share certificate and Register of Members||The name of the person holding the share warrant is neither mentioned in the share warrant nor the Register of Members|
|15.||The person holding the share certificate is a registered member of the company.||The person holding the share warrant cannot be a member of the company unless provided by the Articles of the company|
|16.||Share Certificates shall be issued within three months of the allotment of shares.||No time limit is provided for issuing a share warrant.|
|17.||A share certificate is a compulsory document.||Share Warrant is not a compulsory document.|
From the above discussion, we can conclude that a Share certificate is a more important document than a share warrant. A share certificate signifies the ownership of the members on the shares in the company and a share warrant shows merely the entitlement on the shares of the company. A Duplicate Share Certificate is issued by a company in the case of loss or misplacement of Share Certificate, to avoid any financial loss to the Company and its Shareholders.