Share Certificate is a document which is issued by a company which states the person named is owner of the shares of the company as stated in the share certificate. The Companies Act makes it mandatory for the companies to issue share certificates after the incorporation.
Details to be provided in a Share Certificate
A share certificate issued in India contains:-
- Name of issuing Company
- CIN (Corporate Identification Number)
- Address of Company’s Registered Office
- Name of owners
- Folio number of member
- Number of shares of such share certificate
- Amount which is paid on such shares
- Distinct number of the shares
Timeframe of Issuace of Share Certificate
After Incorporating the company, it needs to issue share certificates within two months from date of incorporation. Where additional shares are allotted for new or the existing shareholders, share certificates are to be issued within two months from allotment date. In case related to the transferred shares, this share certificate shall be issued to transferees within a period of one month of receipt of instrument of transfer by such a company.
Procedures for issuing Share Certificates
Board Meeting & Allotment of shares
The Board of Directors assign a committee of director known as allotment committee. This committee will decide about allotment of shares. Once this allotment committee submits the report in respect to allotment of shares, the board will approve such reports and pass the resolution for allotment of shares to the applicants. Once these shares are allotted by the allotment committee, the company secretary will send the letter of this allotment to the respective members. This allotment letter refers to a document which will notify the applicant that the company has allotted certain number of shares to him. This letter of allotment if considered as the share certificate till the issuance of final certificate.
Register of members
The company secretary then prepares a Register of members from the lists of applications received and allotment sheets. Register of member provides information about the shareholders and details of the shares which are allotted to them.
Preparing and Printing Share Certificates
The company secretary must arrange the form of share certificate according to form suggested by Articles of Association. The secretary must get the form printed together with all the required details as per the provisions of the governing law. Company secretary needs to fill in all the details in the share certificate with help of the application register and allotment sheets.
The secretary also needs to ensure that the certificate is signed by two directors of the company. The secretary needs to sign the share certificate. Company secretary also needs to ensure that the company’s seal and revenue stamp is affixed on each of the share certificates. Once certificates are in order, a board meeting is called for passing the resolution for issuing share certificates.
Intimation and Dispatch of Share Certificate
Company Secretary needs to inform the shareholders that the share certificates are ready and will be delivered. In exchange of the allotment letters and bankers receipt which confirms the payment of the allotment money. A public notice shall be issued for the general information of members. Members who surrender this allotment letters, share certificate shall be dispatched by the registered post to them. The local shareholders as per their preference can also collect the share certificates personally from company’s registered office.
Penalty for Breach in Issuance
If a company makes a default in compliance with the provisions which relate to issue of share certificates. Such type of company will be punishable with fine which would not be less than Rs.25000 but not exceeding Rs.5,00,000 and each defaulting officer of such company will be punishable with fine which is not less than Rs.10,000 but can extend to Rs.1,00,000.
