A Share Warrant is a document issued by the company under its common seal, stating that its bearer is entitled to the shares or stock specified therein. Share warrants are negotiable instruments. They are transferable by mere delivery without registration of transfer.

It is a negotiable instrument and mere delivery transfers the ownership of the shares. Coupons are attached to each warrant, bearing the dates on which the dividend will be paid by the company as they cannot know who the shareholder or who is entitled to the dividends. The person who produces the appropriate coupon can receive payment of the dividend.

Warrants are essentially a right or interest in securities. Since warrants are essentially a right or interest in securities, it shall be treated as a security under clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956).

According to Section 2(81) of Companies Act, 2013 says “securities” means the securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956.

Hence, to understand the definition of securities, we need to refer to the Securities Contract (Regulation) Act, 1956 for the same:

According to Section 2(h) of the Securities Contract (Regulation) Act, 1956, Securities include –

“securities” means the securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);

“securities” include— (i) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate;

(i.a) derivative;

(i.b) units or any other instrument issued by any collective investment scheme to the investors in such schemes;

(i.c) security receipt as defined in clause (g) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;

(i.d) units or any other such instrument issued to the investors under any mutual fund scheme;

(ii) Government securities;

(ii.a) such other instruments as may be declared by the Central Government to be securities; and

(iii) rights or interest in securities

Now the question that should come in one’s mind does Share Warrants issued & subscribed forms a part of Shareholding of the subscriber of such warrants & forms part of the paid-up share capital of the Company?

Since warrants are essentially a right or interest in securities, it shall be treated as a security under clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956). Further, vide RBI Notification No. FEMA 308/2014-RB2 dated June 30, 2014 RBI clarified that warrants shall be treated as security within the meaning of Section 2 (za) of FEMA.

Furthermore, for accounting purposes, the amount received against share warrants shall be shown under the head Shareholder’ funds on the liability side.

As per the prescribed format under Schedule III read with Section 129 of the Companies Act, 2013, the Money received against share warrants has been mentioned as item ( c ) as a part of the Shareholder’s Fund under Equity and Liabilities.

The relevant extract of the said schedule is provided below.


Name of the Company…………………….

Balance Sheet as at ………………………

(Rupees in…………)

Particulars Note No. Figures as at the end of the current reporting period Figures as at the end of the previous reporting period
1  2 3 4


(1) Shareholders’ funds

(a) Share capital

(b) Reserves and surplus

(c) Money received against share warrants

In view of the above, we can opine that money received against share warrants are disclosed separately in the balance sheet under ‘Shareholder funds’ and does not form part of paid-up share capital unless and until converted into shares.

What are the conditions & compliances to be met for issuing share warrants by an unlisted public limited company under Companies Act, 2013?

The Companies Act2013 does not “directly” prescribe any law related to Share Warrant. This explanation makes it clear that a share warrant if to be issued, shall be issued as an issue for a preferential basis as applicable to shares.

Since share warrants are regarded as security, the Company may issue share warrants by the ways enumerated herein below:

Section 23: Public Offer & Private Placement

A Company may issue Securities (including share warrants) by way of Public Offer or Private Placement as per Section 23 of the Companies Act, 2013 and other applicable provisions of Chapter III Part I:

(1) A Public Company may issue securities—

(a) to the public through prospectus (herein referred to as “public offer“)

(b) through private placement by complying with the provisions of Part II of this Chapter; or

(c) through a rights issue or a bonus issue in accordance with the provisions of this Act.

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Company: Mamta Binani and Associates
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  1. sujit kumar das says:

    your notes on share warrant is excellent It will be better if you mention the difference between “share warrant ” and ” share certificate”

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September 2021