Share simply put is a unit of ownership that represents an equal proportion of a company’s capital. Share has been defined in section 2(84) of Companies Act, 2013 according to which it means share in the share capital of a Company and include stocks.
Share certificate is an instrument which prima facie gives the title to the person whose name is mentioned there in to the shares.
Being an instrument which is deemed to be evidence of ownership of shares mentioned there in and there being in existence proper provisions in place regarding issuance, transfer, transmission etc. it is important to discuss provisions pertaining to share certificates in line with amendments made to the Companies Act, 2013 and relevant rules made thereunder.
MANNER OF ISSUANCE
Manner of issuance of share certificate has been provided in Section 46 of Companies Act, 2013 read with Companies (Share Capital and Debentures) Rules. As per the aforesaid section Articles of Association of a Company does not have an over-riding effect on provisions pertaining to issue of Share Certificates.
As envisaged in rule 5(1), in case a company issues any share capital, the share certificate can be issued only:
a. in pursuance of a Board resolution; and
b. on surrender of letter of allotment.[A]
The requirement of surrendering the letter of allotment is not applicable in cases of issue of
bonus shares or issue of shares against acceptance/renunciation letter (i.e. situation of right issue).
The Procedure in regard to signing of share certificates can be classified as under:-
The common seal should be affixed in presence of and the share certificate should be signed by 2 Directors (one of whom shall be non-MD/WTD) authorized by the Board or committee thereof, if so authorized by the Board and Company Secretary or other person authorized by the Board.
In case of OPC (One Person Company), common seal can be affixed in presence of and the share certificate can be signed by a Director or person authorized by the Board and Company Secretary or other person authorized by the Board.
The share certificate should be signed by a Director and Company Secretary, where there is a Company Secretary otherwise it can be signed by 2 Directors (one of whom shall be non-MD/WTD).
In case of OPC (One Person Company) which does not have a common seal, provisions of signing the certificate are the same as they apply to an OPC having common seal except the requirement of affixing the seal.
Under the rules, there is a deeming provision which accepts the validity of printed facsimile signatures of Directors put by means of any machine, equipment, metal engraving, lithography or even affixing digital signature but not rubber stamp. However the responsibility of custody and granting permission of using the aforesaid lies with the Director only.
Share certificate shall be as per form SH-1 or as near to as possible which requires mentioning of the following:-
As per Section 56(4) unless prohibited by any law, order of Court or any competent authority, the share certificate shall be issued within following timelines:-
Rule 5(4) requires making entry of particulars of every share certificate issued in register of member (MGT-1).
As per regulation 2 of Table F of Schedule I to the Act one share certificate for all shares shall be issued free of cost and thereafter Rs. 20/- shall be charged for each certificate after the first in case of several certificates.
Rule 6 contains provisions related duplicate/re-newed share certificate, which can be issued under following situations only on surrender of certificate:-
However, requirement of surrendering of certificate will not apply in following cases:-
In case the certificate is lost or destroyed then a duplicate share certificate shall be issued with prior consent of the board[C] and on:-
* Rule 6(2)(c) provides that duplicate share certificate shall be issued on submission of complete documents within 3 months or 45 days as the case may be in case of unlisted and listed companies, respectively.
As per section 46(5) if a duplicate share certificate is issued with intent to defraud the company shall be punishable with minimum fine of 5 times the face value of shares involved and maximum upto 10 times or Rs. 10 crore whichever is higher and officers in default are liable under section 447.
In cases other than of lost/ destroyed, renewed share certificate shall be issued on:-
* The Surrendered Share Certificate shall be immediately defaced by stamping/printing the word “cancelled” in Bold letters (Rule 7(3)).
** As per proviso to rule 6(1) no fee shall be taken in case of issue of renewed share certificate where place provided for recording transfers gets exhausted.
A register in form SH-2 of every renewed/ duplicate share certificate shall be kept at the registered office or such other place[H] where the register of members is kept, containing following particulars:-
Entries made in the register shall be authenticated by Company Secretary or such other persons as authorized by board for sealing & signing share certificate.
SHARE CERTIFICATE FORMS AND RELATED BOOKS
As per rule 7 all blank Share Certificates should be in printed form and consecutively machine numbered. The Company Secretary or person authorized by the Board shall be responsible for giving account of these forms to the Board.
The custody of books and documents including blank share certificates forms shall be with:-
The preservation of books and documents relating to issuance of share certificate shall be done for a period of thirty years. However under following circumstances permanent preservation is required:-
As per rule 7(3) the surrendered share certificate may be destroyed after expiry of 3 years from date of surrender by authority of Board resolution in presence of person authorised by Board in this behalf. However, this shall not apply to share certificates surrendered for dematerialisation as per regulation 54(5) of SEBI (Depositories and Participants) Regulations, 1996.
[A] The requirement of surrendering of letter of allotment is not applicable in case of issue of shares to subscribers to memorandum as the language of rule 5(1) starts with where a company issues any share capital.
[B] In case of listed companies 15 days as per clause 3 and 47(c) of listing agreement.
[C] The Power can be delegated to committee of Board as per general circular 19 /2014 dated 12.06.2014.
[D] As per clause 9(a) of listing agreement fees charged for torn, defaced, lost or destroyed share certificate cannot be more than as agreed with Stock exchange.
[E] Rs. 20/- as per regulation 3 of table F of Schedule I to the Act.
[F] As per clause 8(d) of listing agreement no fees will be charged for old, decrepit, worn-out or where the place for recording of transfer at back of share certificate gets exhausted.
[G] Rs. 20/- as per regulation 3 of table F of Schedule I to the Act.
[H] any place in India where more than one-tenth of total number of members entered in the register of members reside after passing special resolution at a general meeting, advance notice of which has been given to Registrar of Companies.
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