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What is a share certificate? Research Team | Posted On Tuesday, April 14,2009, 05:18 PM

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What is a share certificate?



A share certificate is a certificate issued by the company stating that the person named therein is the registered holder of particular number of shares of a certain class and they are paid up upto the amount specified in the share certificate. The share certificate must bear the common seal of the company and also must be stamped under the proper stamp act. One or more directors should sign it; it should state the name and profession of the holder and number of shares, their distinctive number and the amount paid up.

Each company making allotment of shares must distribute the share certificate of all shareholders within three months of allotment. In case of transfer of shares, the share certificate must be ready for release within two months after the shares are lodged with the company for transfer. If default is made in complying with the above provisions, the company and all officer of company who is in default is liable to punishment by way of fine which may extent to Rs500 for each day of default. The allotee must give notice to the company reminding of its obligation and even then, if default is not made good within 10 days of the notice, the allotees may apply to the Company Law Board for direction to the company to issue such share certificate in accordance with the Act, application for this purpose must be made with the concerned regional bench of the Company Law Board by manner of petition.

The petition should be accompanied by the following documents :

  • Copy of the letter of allotment issued by the company
  • Documentary evidence for the allotment of the shares or debentures for transfer
  • Copy of the notice served on the company requiring to make good the default
  • Any other correspondence
  • Affidavit verifying the petition
  • Bank draft evidencing payment of application fee
  • Memorandum of appearance with the Board copy of declaration of the board for the executive Vakalat Nama as the case may be Companies act does not set down any form for share certificate.

A Shareholder should maintain his share certificate in safe custody or in case of shares which are traded in demat mode, with the depository. The company may renew or issue a photocopy of certificate if such certificate is proved to have been lost or ruined or having being defaced or mutilated or torn or is surrendered to the company. But, if the company, with the purpose to defraud issues duplicate certificate, the company shall be punishable with the fine upto Rs10000 and all officer of the company who is in default with imprisonment upto 6 months or fine upto Rs10000 or both.

Once a share certificate is issued by the company, the name of the person in whose favour it has been issued becomes the registered shareholder; no one can then deny the fact of his being the registered shareholder of the company. Likewise, if the certificate states that on each of shares a certain quantity has been paid up, no one can deny the fact that such amount has been paid up.

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