What is a share certificate?
Share certificate is a document issued by the company evidencing the number of shares held by a person named therein. It is the Prima facie evidence of the title of the person to such shares. In simple terms, a share certificate indicates the person so named owns the shares mentioned therein.
The Companies Act, 2013 mandates every company incorporated in India and having share capital, to issue share certificate to their shareholders within such period and in such format as is prescribed under the Act.
Format of share certificate?
The Companies Act, 2013, provides a specific format for the share certificates. The format is prescribed under Rule 5(2) of the Companies (Share Capital and Debentures) Rules. 2014 i.e. Form No. SH-1. The Companies shall issue share certificates in a format as prescribed under Form No. SH-1 or any other format as nereto Form SH-1.
What are the mandatory details to be mentioned on the Share Certificate?
Every certificate of shares issued must have following details:
- Name of the company issuing shares
- Registered Office address of the company
- CIN number of the company
- Type of shares for which share certificate is issued
- Face Value Per share
- Share Certificate Number
- Name of the person to whom share certificate is issued
- Registered folio number of the member as per Register of Members
- Number of shares (in number and in words) to which it related and the amount paid up thereon
- Distinctive numbers of such shares
- Date of issue of share certificate
What is the time limit to issue share certificate?
For issuing certificate of shares under various circumstances, the Companies Act, 2013 provides different timelines. Section 56(4) of the Companies Act, 2013 contains the provisions related to time limits for the delivery of the certificates of all securities allotted, transferred or transmitted:
Time limit to issue share certificate
What are the mandatory requirements for the issuance of share certificate?
As per Rule 5 (1) of the Companies (Share Capital and Debentures) Rules, 2014, where a company issues any share capital, no certificate of any share or shares held in the company shall be issued, except:
- Board Resolution is passed in this regard and
- On surrender to the company the letter of allotment or fractional coupons of the requisite value or letter of acceptance or renunciation is submitted to the company.
What if the letter of allotment is lost by the shareholder?
If the letter of allotment is lost or destroyed, the Board may impose such reasonable terms, as to seek any supporting evidence and indemnity and on the payment of out of pocket expenses incurred by the company for investigating the evidence, if any.
Printing of share certificate
The share certificate must be prepared and printed as per the method prescribed in the Articles of Association of the Company. The Company Secretary, where there is so appointed or any other authorised by the Articles/Board, ensure that the share certificate is issued after affixing the revenue stamp and common seal of the company.
Who should sign the share certificate?
Every certificate of share shall be signed by two directors or a director and company secretary, wherever the company has appointed company secretary.
Where the share certificate is issued under the common seal of the company, it should be affixed in the presence of persons required to sign the certificate.
Singing of share certificate in case of One Person Company (OPC)
In case of One Person Company it shall be sufficient if the certificate is signed by a single director and the company secretary or any other person authorised by the Board in this behalf.
Can the Director sign share certificate via affixing Digital Signature?
Yes, a director can sign the share certificate with digital signature.
Explanation to Rule 5(3) of the Companies (Share Capital and Debentures) Rules, 2014 provides that :
“A director shall be deemed to have been signed the share certificate if his signature is printed thereon as a facsimile signature by means of any machine, equipment or other mechanical means such as engraving in metal or lithography or digitally signed but not by means of rubber stamp, provided that the director shall be personally responsible for permitting the affixation of his signature and the safe custody of any such machine, equipment or other material used for the purpose.”
Entry in the Register of Members
Particulars of every share certificate issued in accordance with Rule 5(1) of the Companies (Share Capital and Debentures) Rules, 2014, shall be entered in the Register of Members indicating the details such as name of the person to whom it has been issued, date of issue, number of shares etc.
Intimation and dispatch of share certificate
In case of allotment of shares, the company secretary shall 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. A public notice may be issued for the general information of the members.
Members who surrender their allotment letters, share certificates are dispatched by the registered post to them or members may collect the same in person from the registered office of the company or any other agency office appointed for the purpose.
In case of transfer, transmission or issue of duplicate share certificates to the shareholders, the company secretary shall inform the respective shareholders regarding availability of new share certificates and cause them to deliver the same via speed post within such timeline as applicable, if not collected in person.
What is the Penalty for default in issue of share certificate
As per Section 56(6) of the Companies Act, 2013, where a default is made in complying with the provisions and meeting the timeline for issue and delivery of share certificates to the shareholders, the company shall be punishable with fine which shall not be less than Rs. 25,000 but which may extend to Rs. 500,000 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 Rs. 100,000.
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