Question

Write short note on Share certificate.

Answer 1

Meaning: - A Share Certificate is a document of title to shares. It is issued to the shareholders of the company, as evidence to their shareholding in the company. The company issues the Share Certificate under its Common seal. It must be signed by two directors and countersigned by the authorized signatory or secretary of the company. Every Share Certificate must be stamped with revenue stamp of proper value.

Definition: - Section 84 of the companies Act defines share certificate as ‘A certificate, under the common seal of the company, specifying only the shares held by any member, shall be a prima facie evidence of the title of the member of such shares’.

Contents of Share Certificate

1. Name and Address of the registered office of the company.
2. Name(s) of the Shareholder(s).
3. Serial number of share certificate.
4. Number of Share(s) held.
5. Number and class of shares. (i.e. whether Preference or equity shares)
6. Nominal value and amount paid on each share.
7. Distinctive Number(s) of shares.
8. Date of issue of Certificate.
9. Signature of two directors and one authorized signatory.
10. Seal of the company against the affixed revenue stamp.
11. The face value of the shares.
12. Whether the face value is fully paid or partly paid.

The share certificate is required for the transfer and transmission shares. It is a registered document and not a bearer document. It can be transferred only by following a certain transfer procedure.

 

Statutory Provision regarding share Certificate

1. Time Limit: -The share certificate must be prepared and delivered to the shareholders within 3 months of allotment of shares. In case of transfer, the share certificate should Reach the transferee within 2 months from the date if transfer.

2. Resolution: -Share certificate is issued only after passing of resolution in the board meeting to that effect.

3. Contents in certificate: -Share certificate must specify the name of the shareholder, number, type of shares, amount paid on each shares etc. it should be signed by two directors and the secretary and bear the common seal of the company.

4. Entry in the Register: -All the particulars of share certificate must be entered in the Register of Members. These entries must be authenticated by the secretary or signatories to the certificate.

5. Duplicate and Surrendered Certificates: -If the company issues duplicate certificate, it should be clearly mentioned on the certificate by putting a stamp of word ‘Duplicate’ on the face of the certificate.

In case of surrendered certificates a cancellation mark must be put on the face of the certificate such certificates may be destroyed after three years.

Shares under Depository System: -If the shares are dealt in a depository, after the allotment of shares, company must intimate the depository immediately about the details of allotment even though shares are not in physical form.