Company Share Transfer

Share Certificate Requirement and Procedure to Issue – The Ultimate Guide

Share Certificate

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.

What is Share Certificate as per Companies Act 2013?

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”.

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.

For Example –   Mr. Ram purchased 100 shares of Reliance Company. Then the company issues share certificate to Mr. Ram mentioning the details like the name of the owner, a number of shares held, address etc.

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.

READ  Procedure for Issuance of Duplicate Share Certificate

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.

What are the Contents of Share Certificate?

1. On the front of the Share Certificate

  • Name of the company;
  • Corporate identity number;
  • Address of the registered office;
  • Nominal value per share;
  • Amount paid-up per share;
  • Register Folio Number;
  • Certificate Number;
  • Name of the holders (including the joint holders);
  • Number of shares held in words and in number;
  • Distinctive numbers from to
  • Date of issue of share certificate;
  • Signatory of directors and secretary/any other authorized person

2. On the reverse of the Share Certificate

  • Name of the Transferor;
  • Name of the Transferee;
  • Number of shares;
  • Date of share transfer;
  • Signature of the authorized signatory

The Format of Share Certificate (SH-1)

According to Rule 5(2) of the Companies (Share Capital and Debentures) Rules, 2014, a share certificate is required to be issued in Form SH-1. Although, the rules have given the flexibility to the management to have their own format as near as possible to Form No. SH-1 but keeping in mind following-

  • The name of the person in favor it is issued
  • The related shares
  • Amount paid upper share
Share Certificate

Conditions to be fulfilled before the issue of Share Certificate

From 1st April 2014, a share certificate shall be issued to the new allottees only after satisfying the following conditions-

  • The Board should authorize the issue of certificate by means of resolution.
  • A certificate will issue only on the surrender of the “Letter of Allotment” or a Fractional Coupon” of a requisite value. Furthermore, if it is saved in case of an issue against a “Letter of Acceptance” or a letter of Renunciation or in the case of issue of Bonus share.

What is the Timeline for Share certificate?

1. 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
READ  Provisions relating to Declaration and Payment of Dividend under Companies Act, 2013

2. 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.

3. 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 the period from the 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

4. 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.

5. Time limit for preserving and safekeeping the Share Certificates

  •  All printed Blank certificate shall be safely preserved for 3 years.
  • In case of disputed cases, it is preserved permanently till the company has existence
  • All surrendered certificates shall be immediately defaced, stamped or printed as cancelled in bold letters and shall be destroyed after a period of 3 years from the date of surrender. The surrender will be with the authority of the board by means of a resolution and in the presence of a duly appointed by the board on its behalf.
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Procedures for the issue of Share Certificate under Companies Act, 2013

1. Board Meeting and Allotment of shares

Board of Director meeting should be conducted to form a small committee of Directors to decide the allotment of shares.  And the committee so formed is known as allotment committee. The committee then decides the allotment of shares and submits a report of the Board.

Furthermore, if the board approves the report, then it will pass a resolution to allow the shares to the concerned applicant. Rule 5 stipulates a bard resolution be passed as one of the mandatory steps prior to the issuance of shares.

2. Deliver the letter of allotment

Once the board resolution is passed for allotment of shares, the letter of allotment is dispatched to the concerned members. The allotment letter contains information as to a number of shares allotted to an individual. As per Rules 5, no share certificate can be issued except (a) pursuance of board resolution and (b) on surrender to the company of letter of allotment r fractional coupons of requisite value.

3. Preparing, Printing and Maintaining share certificate

All share certificate used for issuing share certificate shall be printed and properly numbered. And also, the certificate shall be printed with the authority of the Board by means of resolution. In some cases, board committee or company secretary (in case the company has no company secretary then any one of the directors) shall preserve, maintain and safely keep the certificate.

4. Intimation and dispatch of Share Certificate

The company secretary or Director needs to inform all the shareholders about the share certificates that are ready and would be delivered in exchange for allotment letters and bankers receipt confirming payment of the allotment money. A public notice should be served 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 can collect the share certificates personally from the company’s registered office or from dispatching agency.

5. Penalty for breach

Any company making any default in complying the provisions relating to the issue of share certificates, then such company 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.

Signatories of Share certificate

As per sub-rule of rule 5 of the Companies (Share Capital and Debentures) Rules, 2014 the signatories of the share certificate are to be as follows-

Note*- If the composition of the Board permits of it, at least one of the aforesaid two directors shall be a person other than a managing director or a whole-time director.

Hence, there are two ways to sign the share certificate-

  • Printing of Facsimile signature by means of a machine, equipment or any other mechanical device.
  • Digital Signature

The Director will affix the Digital Signature because it is not available for company secretary. Moreover, the common seal is affix only by the company secretary in the presence of the two directors.

Preservation of Share certificate Books

The company secretary or Director shall prepare a Register of members from the lists of application received and allotment sheets. The Register of the member will provide the information about the shareholders and details of the allotted shares to them.

We have tried to explain you on share certificate and procedure to issue share certificate in our best knowledge. To know further, kindly contact us.

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