Section 46 of the Companies Act, 2013, defines the share certificate. Share Certificate issued to an investor is proof of investment made. Such a certificate upholds for rights of ownership in the company. Every company with share capital has to issue shares within the prescribed time frame to the investors issue a share certificate. In case the shareholder transfers his share, the share certificate should be issued to transferees within 1 month. Such a share certificate is to be issued in Form SH-1.
What are the contents of the Share Certificate?
Following details are mandatory to be disclosed in the Share Certificate:
- The name of the Company
- The Corporate Identification Number(CIN) of Company
- Address of the company’s registered office
- The distinct number of shares
- The description of the class of shares
- Nominal value or face value must be mentioned in the share certificates.
- Date of issue of share certificate
- The details of the shareholder which includes name, address and amount paid/invested on shares
- A unique share certificate number and it shall also contain a folio number of the member.
When share certificates are issued?
- The share certificate is issued within 2 months from the date of company incorporation to the subscribers of the memorandum of association (“MOA”).
- In case of an increase of capital by an already incorporated company, share certificate to be issued within 2 months from the date of allotment of fresh shares.
- The share certificate is required to be issued within 1 month in case of transfer of shares.
Every public limited company, listed public company, unlisted company and companies limited by shares can issue shares in dematerialization form and issue share certificates to the shareholders through the online process. Other companies like companies limited by guarantee, co-operatives or non- profit organizations can issue a certificate to its members but not a share certificate.
What is the procedure while issuing the Share Certificate?
The procedure followed while issuing the Share Certificates is as follows:
- An investor requires to open a Demat account with the Depository Participants (“DP”).
- An investor after opens the Demat account must send a Dematerialization Request Form (“DRF”) and also all the physical share certificates to the depository participants, in case of already issued securities.
- After submission of all the required documents, depository participants inform and send the Dematerialization Request Form to the Registrar to the issue.
- Registrar confirms all related things with the demat to Depository and dematerialization registration number is generated and
- Depository credits the dematerialized shares in the demat account of the shareholder.
Of Promoters (Rule 9 of Companies ( Prospectus & Allotment of securities) Rules, 2014 such persons have to hold securities :
- Promoters of every public company (that means includes unlisted also) for the public offer;
- The entire holding of convertible securities of the company before the date of the initial public offer;
By Unlisted Public Companies (Rule 9A of Companies ( Prospectus & Allotment of Securities) Rules, 2014
- Issue of securities By such Unlisted public companies; and
- Facilitate after dematerialization of securities, the transfer of securities by every holder of securities on or after 2nd October 2018.
- These provisions are applicable to deemed public unlisted companies also.
By Listed Companies:
The issue of securities by the company and the transfer amongst holders of securities shall be done in online mode only.
- The Board of Directors by a board meeting pass a resolution for allotment of shares.
- A company prepares a Register of members and provides information such as a class of shares, the value of shares and number of shares, etc. in that register.
- A share certificate is to be signed by two Directors or the Company Secretary of the company along with one director.
- Share certificate requires a common seal and also affixes a revenue stamp.
- A share certificate is a dispatch to the shareholder.
All the companies are other than which are mandated to issue securities or the persons who can hold shares.
What is the penalty in case of default?
As per Section 56(6) of Companies Act, 2013, in issue or transfer or transmission of shares, the penalty (in civil nature) will be applicable as follows:
|On Company||Amount of Rs. 25,000 which is extendable up to Rs. 5,00,000|
|Officer in Default||Minimum Rs. 10,000 extendable to Rs. 1,00,000.|
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