Issue of Share Certificate

Prior to April 2014, the procedure of issuing share certificates was governed by Companies (Issue of Share Certificates) Rules, 1960. With the coming into force of Companies (Share Capital and Debentures) Rules, 2014 w.e.f 01 April 2014, the procedure of issuing shares/debentures has been revisited.

What is Share Certificate?

A Share Certificate is a document issued by a company evidencing that the person named in the certificate is the owner of a number of shares of the Company as specified in the Certificate. The share capital is the major source of funds for a Company apart from other sources such as debentures, loans, etc. A share certificate is documentary evidence of the number of shares held by an individual in the organization issuing such shares. The document so issued under the common seal of the Company, specifying numbers of shares held by any member, is referred to as “Share Certificate.
The following information is mentioned on the share certificate:

• Share certificate must be issued in Form SH-1 or any document that resembles Form SH-1
• Share certificate shall specify the Name of the Company.
• Share certificate shall specify CIN Number of the Company.
• Share certificate shall specify the Registered Office of the Company.
• Share certificate shall specify the Name of the owners of the shares.
• Share certificate shall specify the Folio number of the member.
• Share certificate shall specify the number of shares represented by the share certificate.
• Share certificate shall specify Amount paid on the shares.
• Share certificate shall specify the Distinctive No. of Shares.
• Share certificate shall specify the number of share certificate.

Time Period for Issue of Share Certificates:

• In case of Incorporation: Within a period of 2 (Two) months from the date of incorporation to the subscriber of the Memorandum.
• In case of Allotment: Within a period of 2 (Two) months from the date of allotment of shares.
• In case of Transfer: Within a period of 1 (One) month from the date of receipt of the instrument of Transfer by the Company.

Procedure of Issue of Share Certificate:

The Companies (Share Capital and Debentures) Rules, 2014 hereinafter referred to as “Rules,” stipulates the mandatory conditions to be fulfilled prior to issuance of share certificate and also stipulates the procedure for issuance of duplicate certificates. The procedure of issuing share certificate is as follows:

Board Meeting & Allotment of shares:

A board meeting is called for deciding about the allotment of shares. The board of directors assigns a committee or any directors who would then decide about the allotment of shares. Once shares are allotted by the committee, the authorised director or company secretary if any sends the letters of allotment to the respective members. This letter of allotment is considered as the share certificate till issuance of the final Share certificate. The authorised director or company secretary of the company if any then prepares a Register of members from the lists of applications received and allotment sheets. Register of members provides information about the shareholders and details of the shares which are allotted to them.

Penalty for breach:

Where a company makes any default in complying with provisions relating to the issue of share certificates, such company would be punishable with a fine that wouldn’t be less than INR 25,000 but could extend to INR 5,00,000 and every defaulting officer of such company would be punishable with a fine that wouldn’t be less than INR 10,000 but could extend to INR 1,00,000.

Stamp Duty need to be paid to Collector of Stamps:

As per Indian Stamp Act, a  company needs to pay Stamp Duty to the collector of Stamps/ Treasure officer/ Revenue Authorities of the State on the issuance of a Share Certificate.  The company needs to deposit proper documents like MOA/AOA, Copy of BR, Copy of Share Certificate, Authorization Letter, Application Form, and Form PAS-3 before the Revenue authorities of State. They shall adjudicate the duty that the company needs to pay after the assessment of documents. After adjudication, the company needs to submit share stamp duty with the authorised Bank, authorized institutions and deposit the acknowledgement of payment with the Officer of Revenue authority. The officer after the satisfaction of documents issues a Certificate for issuance of a Share Certificate to the Company.