What is a Mutilated Share Certificate, and When is it Available?

Minakshi Bindhani

06 Apr, 2023

A mutilated share certificate is a share certificate that has been damaged or defaced, making it difficult or impossible to read or verify the information contained on the certificate. Mutilation can occur for several reasons, including fire, water damage, or intentional destruction. When the share certificates are available, it can create several issues for shareholders, companies, and investors. In this blog, we will discuss the impact of the share certificates and the steps that can be taken to address these issues.

Objective

• The object of mutilated share certificates is to replace damaged or destroyed ones, which can occur due to various reasons such as fire, flood, theft, or other physical damage. It refers to those physically altered, defaced, or damaged to such an extent that they are no longer considered valid.
• When shareholders hold mutilated share certificates, it can create challenges for the shareholders and the companies in which they hold shares. The damaged certificate may not be accepted by brokers or exchanges, creating difficulties for shareholders who need to sell or transfer their shares.
• Furthermore, it can be challenging for companies and their transfer agents to verify the ownership of shares when the share certificate is damaged, leading to delays and additional costs.
• Companies and their transfer agents may establish clear procedures for replacing share certificates to address these challenges. sssss
• These procedures aim to ensure that shareholders can replace their damaged certificates with new ones considered valid and maintain accurate share ownership records. This helps to ensure the smooth functioning of the stock market and protect the interests of shareholders.

The Procedure to be followed: –

If one has mutilated or damaged share certificates, the Securities and Exchange Board of India (SEBI^[1]) has provided guidelines for the procedure to be followed. Here are the steps you should take:

Lodge a complaint with the company’s registrar and transfer (R&T) agent – The R&T agent is responsible for maintaining the company’s shareholder records. After providing the details of the mutilated share certificates, including the certificate number, the number of shares, and the name of the shareholder. One must also submit a copy of your identity proof and the original mutilated certificate.

Obtain a duplicate certificate – Once the R&T agent receives the complainant and verifies the details, they will issue a duplicate certificate. One may be required to pay a fee for issuing a duplicate certificate. The duplicate certificate will have a notation indicating a reissued certificate.

Lodge a police complaint – One should complain to the local police station about the loss or damage of your original certificate. The police complaint should include details such as the certificate number, the number of shares, and the name of the shareholder. One should obtain a copy of the First Information Report (FIR) from the police.

Inform the stock exchange – If the shares are listed on a stock exchange, one should inform the stock exchange about the loss or damage of the original certificate.

Submit the necessary documents to the R&T agent – one must submit the original FIR copy, a notarized affidavit, and a copy of the duplicate certificate to the R&T agent. The affidavit should state that you have not sold or transferred the shares to anyone else.

Receive the reissued share certificate – Once the R&T agent receives the necessary documents, they will issue a reissued share certificate. The reissued certificate will have a notation indicating it is a reissued one.

It is essential to follow these procedures carefully to ensure that you receive a duplicate or reissued certificate for your damaged or mutilated share certificate.

Conclusion

In conclusion, mutilated share certificates can create significant challenges for shareholders, companies, and investors. However, these issues can be addressed systematically and efficiently by establishing clear procedures for the replacement of the certificates, guidelines for verifying ownership of shares, and accepting share certificates by brokers and exchanges. By doing so, companies and their transfer agents can ensure that accurate records of share ownership are maintained. At the same time, shareholders and investors can buy and sell shares with confidence and ease.

Also Read: Procedure for Issuance of Duplicate Share Certificate