Introduction
Most of the private limited companies are closely held with the limited number of members, or sometimes having only family members as shareholders of the company and therefore the company prefers to issue share certificates in physical form. A share certificate is a legal document that certifies the legal ownership of a specific number of shares held in a company. What if this share certificate is lost or misplaced? Does the Companies Act, 2013 provide for the issue of duplicate share certificates?
Well, Section 46(2) of the Companies Act, 2013 read with Rule 6 of the Companies (Share Capital and Debentures) Rules, 2014 provides the procedure for issuing duplicate share certificates to a shareholder in case his share certificate(s) is lost or misplaced.
In this article, we will analyse the procedure to be followed for issue of duplicate share certificates by a private limited company and what steps a shareholder must take in case his share certificate(s) is lost or misplaced.
What is a duplicate share certificate?
A duplicate share certificate means a certificate issued in lieu of original share certificate when such original share certificate is reported to be lost by a member along with proper evidence or is surrendered to the company if the same is defaced, mutilated or torn out.
When a Duplicate Share Certificate is issued?
As per Section 46(2), a duplicate share certificate can be issued if the same is
- Proved to have been lost or destroyed or
- Has been defaced, mutilated or torn out and is surrendered to the company.
Here we are considering the first case i.e. issue of duplicate share certificate when such certificate is Proved to have been lost or destroyed.
How to apply for a duplicate share certificate in case it is lost or misplaced?
Unless Articles of Associate of the Company provides any procedure for application and issue of duplicate share certificate, the company shall issue duplicate share certificate as per the provisions of Section 46(2) read with Rule 6 of the Companies (Share Capital and Debentures) Rules, 2014.
Legal Provision: As per Rule 6(2)(a) to (c) of the Companies (Share Capital and Debentures) Rules, 2014, The duplicate share certificate shall be not issued in lieu of those that are lost or destroyed, without the prior consent of the Board and without payment of such fees as the Board thinks fit, not exceeding rupees fifty per certificate and on such reasonable terms, such as furnishing supporting evidence and indemnity and the payment of out-of-pocket expenses incurred by the company in investigating the evidence produced.
Step by step procedure on Issue of Duplicate share certificate in case the share certificate is lost or misplaced:
Step 1: Shareholder must inform immediately to the company regarding misplaced or lost share certificate
The shareholder should communicate immediately to the company that the share certificate is lost or is misplaced. Such communication shall either be in the form of a letter or by an email. The shareholder shall provide details of lost share certificate such as, name on the share certificate, share certificate number, number of shares, folio number etc. to the company.
Step 2: Company shall inform the shareholder regarding detailed procedure
Upon receipt of communication from the shareholder regarding the lost or misplaced certificate, the company shall inform detailed procedure and guide him on the information and documents required for issuing a duplicate share certificate.
If the Articles of Association of the company provide the procedure to be followed, then due care must be taken to comply the same.
Step 3: The shareholder is required to take the following steps
- Lodge a complaint with the Police Station regarding misplaced or lost share certificate(s) specifying the details such as share certificate no(s), shareholder name, distinctive no(s) and no. of lost shares.
- Prepare an Indemnity Bond on non-judicial stamp paper of Rs. 500 and
- Prepare an affidavit on non-judicial stamp paper of Rs. 100
Step 4: The shareholder shall submit following documents to the company
- Request Letter duly signed by the shareholder (in whose name original shares were issued)
- Original Indemnity bond on non-judicial stamp paper of Rs. 500
- Original affidavit on non-judicial stamp paper of Rs. 100
- A copy (duly certified) of FIR filed with the police station for lost share certificate(s).
Step 5: Upon receipt of the request letter and other required documents, the Board shall take such necessary steps to verify the authenticity of documents and upon due confirmation, approve the matter by passing a board resolution.
Step 6: The fees required for issue of duplicate share certificate(s) shall be determined by the Board which shall not exceed Rs. 50 per certificate. The company may also ask shareholder to pay out of pocket expenses incurred by the company while investigating the evidence produced by the shareholder.
Step 7: Post-approval and payment of fees by the shareholder, the company shall issue a duplicate share certificate(s) to the shareholder within a period of three months from the date of submission of complete documents to the company.
Step 8: The share certificate(s) should have the following words on the face of the certificate
“Duplicate issued in lieu of share certificate number ___” The word “Duplicate” should be stamped or printed in bold letters on the face of the certificate.
Step 9: The details of the duplicate share certificate issued shall be entered in the Register of Renewed and Duplicate Share Certificate maintained in Form No. SH-2.
Is Public Notice in Newspaper for issuing duplicate share certificate(s) is mandatory for private limited companies?
Most of the private limited companies are closely held. The Board is authorised to approve request for the issue of duplicate share certificates. If the intention is not bad then the Board may consider to issue duplicate share certificate(s) without public advertisement. But in case of public limited companies and listed companies issuing public notice in newspaper is a must and the cost of such advertisement shall be borne by the shareholder.
Who is authorised to issue a Duplicate Share certificate?
A request for issue of duplicate share certificate shall be made to the Board of Directors along with proper documents and evidence. The Board by passing a resolution shall approve the issue of duplicate share certificate. Post approval by the Board, company secretary if the company has any, or any other person authorised by the board shall issue duplicate share certificate(s) to the shareholder.
Who shall sign a duplicate share certificate?
Such certificate shall be issued under the common seal of the company, if any or signed by two directors or by a director and the company secretary if the company has so appointed.
Time Limit to Issue Duplicate certificate
The company shall issue Duplicate share certificates within a period of 3 months from the date of submission of complete documents by the shareholder to the company. The Board shall approve the issue of duplicate share certificate to the shareholder via a board resolution.
Share Certificate Number in case of Duplicate Share Certificate
Share certificate number shall be the next consecutive number after the certificate last issued, as per the counter folio of the share certificate Book. The new share certificate will be issued in lieu of original share certificate and therefore on the face of share certificate, words “Duplicate issued in lieu of share certificate No.____” should be mentioned.
What should be the Date on Duplicate share certificate
The time limit as specified under Rule 6(2)(c) of the Companies (Share Capital and Debenture) Rules, 2014 to issue duplicate share certificate(s) in case of unlisted companies is within 3 months from the date of submission of complete documents to the company. Also, the Board of Directors must approve the issue of duplicate share certificate(s) to the shareholder via a Board Rsposultion.
Therefore considering all above, the date of issue of duplicate share certificate should be the date of Board Meeting in which the request for issue of duplicate share certificate is accepted/approved by the Board, and such date should be within 3 months from the date of submission of complete documents to the company.
Whether stamp duty is applicable on duplicate share certificate?
Yes, stamp duty on duplicate share certificate is applicable and shall be paid in accordance with the duty provided in the stamp laws of respective states.
In case of issue, transfer or sale of securities, if the stamp duty is paid on the principal instrument, then no stamp duty is required to be charged on any other instrument relating to such transaction. Issuing duplicate share certificate is neither a case of issue or transfer or sale of security, therefore stamp duty is applicable on duplicate share certificates.
It is also important to note that stamp duty shall be paid as per the state where the registered office of the company is situated irrespective of the place where the board meeting for approval is held.
Penalty for Intention to Defraud
If a company with the 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.
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