Share Certificate

A legal document issued as evidence to the dividend in SH-4 format certifying the person with the ownership rights for the number of shares he holds in the company is called a share certificate or stock certificate.

What is the Share Certificate?

A share is a part or holding of a shareholder in the share capital of a company. While share certificate is evidence that acts as legal evidence for the person that he is the owner of the shares he has invested in the corporation. The Indian Companies Act mandates companies for issuing share certificates post their incorporation in Form SH-4 format.

What is the time frame for issuing a share certificate?

After incorporating a company, the period for issuing a share certificate to the concerned person is two months from the date of incorporation. Even In case of allotting additional shares to new or existing members the period remains fixed for two months from the date of allotment

In a case where shares are transferred to another person, the share certificates should be transferred within a period of one month of receipt of the instrument of transfer by such Company.

What are the details mentioned in the share certificate?

Every certificate issued contains specific details as:

  1. Name of the company
  2. The registered office address of the company
  3. Corporate Identification Number of the company
  4. Name of the shareholder
  5. No of shares issued to the shareholder
  6. Folio no. of the shareholders
  7. Date and venue of the shares issued
  8. Amount paid on such shares
  9. Class of shares

What is the procedure of issuing a share certificate?

Step – 1: Board Meeting

After incorporating a company, it is mandatory for the company to hold a board meeting where the members of the board assign a committee of directors called the allotment committee. This committee will be responsible for the distribution of shares.

The allotment committee needs to prove a report to the board, who then approves and passes the resolution and allows allotment of shares to the respective owners.

Step – 2: Letter of allotment

After allotting shares, the company secretary sends the letter of allotment to the respective owners. The letter encloses details about the no. of shares allotted to the person. This letter act as an insurance letter until the final share certificate is issued to the person

Step – 3: Register of members

A register is prepared by the company secretary to keep track of the applications received, allotment sheets and details of shares provided to the shareholder.

Step – 4: Preparing Share Certificate

As per the article of association, the company secretary is required to prepare the form of share certificate with all the required details as the government provision.

The company secretary should make sure that the certificates are signed by him and a minimum of two directors of the company. the certificates should be sealed and stamped

Step – 5: Allotment of shares

After preparing the share certificates, a board meeting is held in which a resolution is passed for the allotment of the share certificates. The company secretary then informs all the concerned shareholders that the share certificates would be delivered to them in exchange of allotment letters and bankers receipt confirming payment of the allotment money. Public notice should be issued for the general information of the members.

Members, who surrender their allotment letters, share certificate, are dispatched by the registered post to them. The local shareholders as per their preference can also collect the share certificates personally from the company’s registered office or from agency appointed for dispatching the share certificates.

When can share certificates be replaced?

Share certificates can be replaced in cases like:

  • If the certificate issued is damaged or deformed
  • If the certificate is said to be lost, stolen or destroyed

A shareholder waiting for a replacement certificate exercise the right to be issued with a single certificate or separate certificates. Which is returned with the certificate which is to be replaced to the company if it is damaged or defaced and should comply with such conditions as evidence, indemnity and the payment of a reasonable fee as the directors decide.

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