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On-time allotment of shares is a mandatory function of the Company and also, as per Companies Act, Share certificate should be issued within the statutory time frame. In this article we shall discuss about the issuance of Share Certificates.
Share certificate is a document that is issued by a company evidencing that a person named in that certificate is the owner of the company’s shares. As per Companies Act, companies are required to issue share certificate post their incorporation.
The time limit for Allotment of shares means the appropriation of a certain number of shares to an applicant in response to his application for shares, i.e., the distribution of shares among those who have submitted a written application on a predetermined basis.
The company should issue the share certificate within two months after the incorporation of the company. In case where additional shares are allotted to new or existing shareholders, the share certificate has to be issued within two months period from the allotment date.
In case related to share transfer, the share certificate should be issued to transferees in one month of receipt of the instrument of transfer by such company.
There are certain restrictions related to timelines within which securities are to be allotted after the company has received Share Application money and within which the share certificates are to be issued.
By the Companies Act, 2013[1], a public or private company may issue securities in any of the following manners:
Public Company-
Private Company-
The time limits for allotment of securities and issuance of security certificates are as under:
Allotment of Securities
The Issue of Share Certificates
In case of a company making default in complying with the provisions of issuance of share certificate, that company will be punished with minimum 25000 rupees fine that can extend to 5 lakh rupees. Every defaulting officer of that company shall be punished with fine of minimum 10000 rupees and can extend to 1 lakh rupees.
From above, it is quite clear that a company should comply with the provisions related to share certificates or else they would be liable to pay penalty.
Read our article: What is the Procedure for Shares Issue through Bonus Issue?
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