Company issues a document which is evidencing that the person named in the certificate is the owner of the number shares of that Company as it is specified in the Certificate, that document is a Share Certificate.
Further, Companies Act requires the company to issue share certificates post-incorporation of the company.
Face Value of Share Certificate:
The face value or nominal value of shares mentioned on the share certificate must be as per the Memorandum of Association as well as the Articles of Association of the Company. Also, Shares of a company not listed on any stock exchange can have a nominal value of Rs.1, or Rs.10, or Rs.100 or Rs.1000 as per the requirements of the promoters. Shares listed on any stock exchange but not in DEMAT form should have a face value of Rs.10.
Types of Share Capital
- Firstly, Equity Share Capital
- Secondly, Preference Share Capital
Time Period for Issue of Share Certificates:
- In case of Incorporation: Within a period of 2 (Two) Month from the date of Incorporation to the subscriber of Memorandum.
- In the case of Allotment: Within a period of 2 (Two) Month 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
Share Certificate shall specify the following Matters:
- Name of Company, CIN of Company also the Registered Office Address of the Company
- Name of Member
- Every Certificate shall be under the Common Seal of the Company
- Number of Shares it relates
- Amount paid on those shares
- Distinctive Number of Shares
- Number of Share Certificates
- Folio Number of Member
Details Mentioned in Share Certificate
Every share certificate of a company must have the following information on the share certificate:
- The share certificate should be issued in Form SH-1 or any document that resembles Form SH-1
- Name of the Company
- CIN Number of the Company
- Registered Office of the Company
- Name of the owners of the shares
- Folio number of the member
- Number of shares represented by the share certificate
- Amount paid on the shares
- Distinctive number of shares
- Number of share certificate
Procedure for Issuing of Share Certificate
Board Meeting and Allotment of Shares
Board has to call a Board Meeting to discuss the topic of allotment of shares. The Board of Directors appoints an allotment committee that would provide a report on the allotment of shares. The Board then approves such a report and passes the resolution for allotting shares to the respective applicants.
Once allotment committee allots the shares, the company secretary sends the letters of allotment to the respective members. Also, allotment letter refers to a letter that notifies the applicant that the company has allotted a certain number of shares to them. This letter of allotment is considered as the share certificate until the issuance of the final certificate.
Register of Members
The Company Secretary firstly prepares a Register of members from the list of applications received and the allotment sheets. Also, Register of a member provides information about the shareholders and details of the shares which are allotted to them.
Preparing Share Certificates
The company secretary arranges the Form of the Share Certificate according to the form suggested by the Articles of Association (AOA) then the secretary fills all the details in the share certificate with the help of the application register and allotment sheets. They also ensure that the Directors of the Company have signed the share certificate.
Further, Company’s seal and revenue stamp should be 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.
A Company not complying with the provisions relating to the issue of certificates will be fined a minimum amount of INR 25,000 which could be extended to INR 5 Lakh. Furthermore, every defaulting officer of the Company would be fined a minimum amount of INR 10,000 which could extend up to INR 1 Lakh.
A share certificate should be signed by either two company directors or one director and the company secretary. However, for companies with a single director and no company secretary, the company director can sign the share certificate in the presence of a witness who attests to his or her signature.
It is a written document signed on behalf of a corporation that serves as legal proof of ownership of the number of shares indicated. Also, share certificate is also referred to as a stock certificate.