Share certificate (section
113): It is a document which certifies that the allottee is the holder
of specified number of shares in the company. It is a document of title also.
It is not a negotiable instrument because it is not transferable. According to
section 84, a share certificate shall be:
Ø Prima facie
evidence of the title of the member to such shares.
Ø Estoppel as
to title: company cannot deny the fact that the person is not holder of the
shares.
Ø Estoppel as
to payment: company cannot deny the fact that the shares are not paid up if in
share certificate the shares are fully paid up.
Procedure for Issue
of Share Certificate
No share
certificate shall be issued except:
(i) In pursuance
of a resolution of the Board of Directors.
(ii) On surrender
to the company of the letter of allotment, except in case of issue against
letter of acceptance or of remuneration, or in case of issue of bonus shares.
Procedure: The Company
undertakes the following procedure for issue of share certificate.
1. The Board of
Directors before issuing a share certificate must pass a resolution to its
effect the letter of allotment or fractional coupons of required values should
be surrendered to the company. when such type of documentary evidence are not available
due to the same having been lost or destroyed, the board should prescribe such
conditions as regards to indemnity & payment of incidental expenses which
is important for the company to incur in finding out the evidence for the
purpose of proving the title of the shares.
2. A share
certificate will not be issued in exchange of consolidated or sub-divided
shares or in place of torn, defaced old shares or where cases in the reverse
for recording in lieu of which unless the certificate of which it is issued has
been surrendered to the company.
3. In every
certificate the name of person should be mentioned who is the owner of the
share to which the certificate relate and the amount paid up.
4. The
duplicate share certificate must not be issued in place of the lost or
destroyed share without the consent of the board.
5. Where a
certificate has been issued in the place of old certificate, this fact must be
shown on the face of the certificate.
6. All the
books and documents relating to the issue of share certificate must be under
the safe custody of the managing Director and the other directors of the
company.
7. All the
forms required for the purpose of the issue of share certificate must be
printed under the authority of the Board and person appointed by the board
should have the custody of all blocks and other equipment of printing.
8. The issued
share certificate must possess the common seal of the company which must be
affixed in the presence of director or any other person appointed for the
purpose by the Board. Share certificate should be signed by the persons
mentioned above. One of the two directors must be a person other than the
managing or whole time director.
9. When a
certificate is issued in lieu of one lost or destroyed, it must contain the
statement “Duplicate issued in lieu of certificate No….” In addition to the duplicate shall be stamped
or punched in bold letter across the face of the share certificate.
10. Matter
relating to the certificate issued under rule 4(1) must be entered on the
Register of members against the name of persons and in whose favour the
certificate have been issued, also mentioned the date of issue. In the same way
entries relating to Rule 4(2) and (3) must be mentioned in the register. Both
these categories should be approved either by the secretary or by a person
appointed by the Board (Rule 7)
Time
Limit for issue of Share certificate:
1. In case of
allotment, within 3 months of the allotment.
2. In case of
transfer, within 2 months.
In both the above cases the time limit can be increased to up to 9
months by get it sanctioned from the Company Law Board.
Share
Warrant
Share warrant us a document issued by the company limited by
shares, if so authorized by its Articles. The warrant is issued under the
common seal of the company and states the owner of the warrant is entitled to
the certain number of shares specified therein. As it is a bearer document, it
can be transferred by mere delivery.
According to section 114 of the companies Act, the share warrant
can be issued only after getting permission from the Central Government. The
share warrants are issued only in respect of the shares, which are fully paid
up. For the payment of the future dividend the dividend Coupons are attached
with share warrant. When the Share warrant is issued by the company, the
company immediately will strike out from its register of members, the name of
the member in whose name the share warrant has been issued.
According to section 115, the following points should be recorded
in the register of members upon the issue of the share warrant:-
1. The date on
which the share warrant has been issued.
2. The reason
for the issue of the share warrant.
3. A statement
of the shares specified in the warrant, distinguishing each share by its
number.
Difference
between Shares warrant and share certificate
1.
A share
warrant can be issued only by pubic companies. A share certificate, on the
other hand may be issued be pubic as
well as private companies.
2.
Issue of
share warrant requires provision in the articles and also approval from the
C.G., It is not necessary in case of share certificate.
3.
A share
warrant can be issued only with respect to fully paid up shares. Whereas a
share certificate can be issued at any stage.
4.
The holder
of share certificate is a member of the company. Holder of share warrant is not
member of the company unless article authorized him for particular purpose.
5.
A share
warrant can be transferred by mere delivery and no registration of transfer
with the company is required, transfer of shares in not complete unless re-registered
by the company.
6.
No stamp
duty is payable in transfer of a shares warrant whereas stamp duty is payable
on transfer of shares.
7.
A share
warrant is transferable as negotiable instrument. A share certificate is not so
considered.
Is the bearer of share warrant
a member of the company?
The bearer
of a share warrant is not a member of the company [section 2(27)]. However, if
company’s Articles of Association so provide, he may be treated as a member of
the company for any purpose defined in the Articles [section 115(5)]. Thus, the
Articles may provide that the bearer of a share warrant shall be allowed to
exercise the rights of a member, such as attending meetings, approving annual
accounts, appointing directors, etc. But, having regard to the express
provisions of section 270(4), the Articles of Association of a company cannot
provide that the shares specified in a share warrant may be considered as
qualification share for the office of a director.
Re-conversion of Warrant into
shares:
A share
warrant may, at any time be surrendered by the holder to the company for
cancellation, and his name can again be entered into the register of members,
provided the Articles do not prohibit such conversion and the fee prescribed by
the Board of Directors for the purpose is paid [section 115(2)]
In the event
of such conversion, if the company enters the name of a bearer of a share
warrant in respect of shares therein specified, without the warrant being
surrendered and cancelled, the company shall be responsible for any loss that
may be occasioned to any person in this regard [section 115(3)]
On surrender of the share
warrant, the date of the surrender shall be entered in the register of members.
[section 115(4)].
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