What Is A Share Certificate?
A Share Certificate is a legal document issued by a company to the owner of the company’s shares certifying that the person named in the certificate is the actual owner of the shares. As per the Indian Companies Act, it is compulsory for every company to issue a share certificate to its shareholders after the company registration process is completed.
A share certificate is to be issued by a company mandatorily within two months from the date of company incorporation. Not following this requirement can attract significant penalties for the company from the MCA.
Required Details for A Share Certificate
A share certificate must contain the following information:
- Name of the company issuing the share certificate.
- CIN, i.e. Corporate Identification Number of the company.
- Address of the company’s registered office.
- Name of the owner of shares.
- Folio number of member.
- The number of shares represented by such share certificate.
- The amount paid for the shares.
- The distinct number of the shares.
Procedure Followed To Issue Share Certificate
The following process is followed to issue a share certificate by the company.
Step 1 – Board Meeting
A board meeting is called for to pass the resolution for allotment of shares to the applicants. After the board meeting, the letters for allotment of shares are sent to the members and these letters act as the temporary share certificates until the actual share certificates are issued by the company.
Step 2 – Register Of Members
The Register of members is prepared from the lists of application received and allotment sheets. This Register provides the details of the shareholders and shares allotted to them. A company secretary prepares this Register for the company.
Step 3 – Drafting Of Share Certificates
The share certificate is prepared in the prescribed format and signed by two directors of the company as well as the Company Secretary. The share certificate is also attested with the company’s seal and revenue stamp. Once the certificates are drafted and prepared, another board meeting is called for to pass the final resolution for issuing share certificates to the shareholders.
The shareholders can then surrender their allotment letters and get their share certificates from the company either personally or through a registered post.
Step 4 – Penalty For Not Issuing Share Certificate
If a company fails to comply with the requirements to issue a share certificate to its shareholders, the company can face a penalty of not less than INR 25,000, which could extend to INR 5,00,000. Along with this, every defaulting officer of the company would be punishable with a fine of not less than INR 10,000, which could extend to INR 1,00,000.