Share Certificates under the Companies Act, 2013: Meaning, Procedure, and Legal Framework

By Akansha Jain | Updated on April 11, 2025 | 8 min read

Share certificates are fundamental documents in company law, serving as evidence of share ownership. This comprehensive guide explains what share certificates are, their legal status and importance in private, public, and listed companies, the step-by-step procedure and timeline for issuing them, and compliance requirements (including who must sign certificates, how records are kept, and what happens if things go wrong). We’ll also touch on relevant case laws, SEBI circulars on duplicates/splits, and penalties for delays or irregularities, illustrating concepts with examples for clarity.

Meaning and Legal Status of Share Certificates

 

 

 

 

 

 

(File:Best share certificate.jpg - Wikipedia) An example of a physical share certificate (Bombay Electric Supply & Tramways Co. Ltd., early 20th century). Such certificates are official documents issued to shareholders as proof of ownership of shares.

A share certificate is a document issued by a company that certifies the ownership of a specified number of shares by the person named on the certificate (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). In other words, it is like the “title deed” for shares – a formal evidence that you hold shares in the company. However, it is crucial to understand what a share certificate does and does not represent legally:

  • Evidence of Title: Under Section 46(1) of the Companies Act, 2013, a share certificate (issued by the company and duly signed/stamped as required) is prima facie evidence of the shareholder’s title to those shares (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). This means that in legal proceedings, the certificate is accepted at face value as proof that the person named is the owner of the shares, unless proven otherwise.
  • Not a Negotiable Instrument: A share certificate is not a negotiable instrument or a bearer document – it cannot be simply endorsed or transferred by delivery like a cheque or currency note (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). If you possess someone else’s share certificate, that alone doesn’t make you the owner of those shares; the proper transfer procedure must be followed (more on that later). Unlike, say, a banknote which conveys value by possession, a share certificate is tied to company records and procedures for any change in ownership.
  • No Guarantee of Title by Company: Importantly, the certificate is not a warranty of title by the company (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). This means the company, by issuing the certificate, isn’t guaranteeing absolutely that the person is the rightful owner against all claims – it is merely recording the ownership as per the company’s register. For example, if there was some fraud or irregularity in how the person got the shares, the certificate doesn’t cure those underlying issues (though an innocent third party relying on a genuine certificate does get some legal protection under estoppel principles). In practical terms, this protects the company – the certificate reflects the company’s records but the company isn’t insuring the title.
  • Shares vs. Share Certificates: It’s worth noting that shares themselves are intangible movable property (Section 44 of the Act) that are transferable as per the company’s Articles (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). The share certificate is the physical token of this ownership. One can be a shareholder (e.g. by being recorded in the company’s member register after a valid transfer) even before the actual certificate is issued. Conversely, holding a certificate in hand without a valid allotment or transfer doesn’t make one a shareholder – the company’s records (register of members) and processes govern the actual ownership.
  • Dematerialized (Demat) Shares: In modern contexts, especially for public companies, shares often exist in dematerialized form (electronic book-entries with a depository like NSDL/CDSL) rather than as physical certificates. In such cases, no physical certificate is issued; instead, the depository’s record is the prima facie evidence of ownership (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). Section 46(4) explicitly states that when shares are held in demat form, the depository’s record of the beneficiary is equivalent to a share certificate (Section 46.Certificate of shares. | Companies Act Integrated Ready Reckoner|Companies Act 2013|CAIRR). For instance, if Alice holds 100 shares of a listed company in her demat account, her statement of holdings (and the depository’s electronic register) serves as evidence of her title just as a share certificate would in a physical system.

Analogy: Think of a share certificate like the registration certificate for a car. The certificate shows who the registered owner of the car is, which is strong evidence of ownership, but it’s not the car itself. If you sell the car, you must go through the proper transfer of registration; simply holding the old registration paper doesn’t make you the owner. And if the registration paper is lost or damaged, you can get a duplicate issued through proper procedure, but until then, the official records still determine ownership. Similarly, share ownership is ultimately determined by the company’s records (or depository records), and the certificate is a reflection of those records for the shareholder’s convenience and proof.

Importance in Private, Public, and Listed Companies

The role and importance of share certificates can vary depending on the type of company and how its shares are held:

  • Private Companies: In a private company (typically with a smaller number of shareholders and restrictions on share transfers), share certificates are often the primary tangible evidence of ownership for members. Many private companies’ shares are not in demat form (dematerialisation is not mandatory for private companies), so physical certificates remain common. For example, if you start a family-run private company, each founder and investor would receive share certificates for their holdings. These certificates are important for record-keeping and are often required when those shareholders need to prove their stake (e.g. for collateral, or if a dispute arises). Since private companies restrict share transfers (as per their Articles, by definition of “private company”), any transfer of shares must be approved and then a new certificate is issued to the new owner. Hence, maintaining accurate certificates is crucial to avoid conflicts over ownership in closely-held setups.
  • Public Unlisted Companies: For unlisted public companies, share certificates also remain important unless the company voluntarily opts for demat for its shareholders. Such companies might have more shareholders than a private company, but not as many as a listed company. Physical share certificates would be issued on allotment or transfer of shares. Members of the public might hold these certificates as proof of their investment (for example, if a public company raises money from investors without getting listed, those investors get certificates). The legal framework for issuing and managing certificates (as discussed in this article) applies equally to unlisted public companies. One key difference is that public companies (even if unlisted) often have to follow more rigorous standards and may eventually migrate to demat if they have a large shareholder base, to streamline transfers.
  • Listed Companies: In listed companies (whose shares trade on stock exchanges), the landscape has shifted dramatically towards dematerialization. In fact, since 2019, as per SEBI mandates, transfers of listed company shares cannot be done using physical certificates – they must be in demat form (with very limited exceptions, like transmission or transposition) ([PDF] Amendment to Securities and Exchange Board of India ... - SEBI). This regulation was introduced to curb fraud and streamline settlements: effective April 1, 2019, stock exchanges and listed companies stopped accepting physical transfer deeds, meaning if you held a paper certificate and wanted to sell your shares, you first had to convert it to demat. Therefore, for listed companies today, most shareholders (especially those who trade on exchanges) have their shares in electronic form, and physical share certificates are no longer issued in routine for trading purposes. Instead, when you buy shares of a listed company, your demat account is credited – you don’t receive a ornate paper certificate as was common decades ago.

That said, share certificates in listed companies have not disappeared entirely. Some shareholders, particularly long-term holders from before the demat era, might still possess old physical certificates. Those certificates are still valid evidence of their ownership unless and until they dematerialize them. Listed companies (through their Registrars and Transfer Agents, RTAs) will still issue certificates in certain scenarios – for example, if a shareholder requests a duplicate certificate for lost shares and opts (or is required) to have it in physical form for some reason, or when issuing new shares to shareholders who do not have a demat account (though nowadays having a demat account is practically a prerequisite for participating in public issues). Even in these cases, companies and RTAs encourage converting to demat immediately. In fact, SEBI circulars have standardized procedures for handling requests like issue of duplicate or split certificates and often require that the new issuance be done in demat form for security (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times).

Example: Imagine Mr. X bought shares of a listed company in the 1990s and still holds the original paper certificates. If he wants to sell now, he must send those certificates to a depository participant to dematerialize them (convert to electronic form) since a buyer in 2025 won’t accept a paper transfer. The company’s RTA, upon receiving the demat request, will cancel the physical certificate and credit the shares to Mr. X’s demat account. Only then can he sell them on the exchange. Thus, in listed companies the share certificate’s importance has shifted – it’s more of a historical record or a backup, while the primary evidence of ownership is the demat account entry. Nonetheless, the law (Companies Act and SEBI rules) still governs how any remaining or new physical certificates are to be managed, ensuring even those shareholders are protected.

  • Public Confidence and Legal Disputes: In all types of companies, share certificates (or demat statements) are vital for shareholder confidence. They give shareholders something tangible to hold onto as proof of their investment. In legal disputes (say, a contested ownership of shares, or when claiming rights like dividends or voting), producing the share certificate can strengthen a shareholder’s claim. Conversely, if someone alleges they are a shareholder but their name is not on any certificate or the register, they have an uphill battle to prove their case. Thus, maintaining proper share certificates is not just a clerical formality – it underpins the integrity of the company’s ownership records.

Procedure for Issuing Share Certificates

Issuing a share certificate isn’t as simple as printing a piece of paper. The Companies Act, 2013 and the related Rules lay down a specific procedure to ensure that share certificates are authorized, accurately prepared, and properly recorded. The process can be broken down into steps and typically applies whenever shares are allotted (e.g. new shares issued) or transferred/transmitted to someone. Here’s a step-by-step walkthrough of how share certificates are issued:

  1. Board Authorization: All issuance of share certificates must be approved by the company’s Board of Directors. As per Rule 5(1) of the Companies (Share Capital and Debentures) Rules, 2014, a company shall issue a share certificate only pursuant to a resolution passed by the Board (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). This means at a duly convened Board meeting (or by a committee authorized by the Board), directors must sanction the issuance of certificates to the concerned shareholders. In practice, the Board resolution will specify the names of allottees or transferees, the number of shares, and authorize the preparation and signing of the certificates. Example: When a company completes an allotment of shares (say, to new investors in a private placement), the Board in the same meeting (or a subsequent meeting within the time limit) will pass a resolution like: “Resolved that share certificates be issued to the following allottees for the shares allotted on [date]…”.
  2. Preparation of Certificates (Form SH-1): The share certificates need to be prepared in the prescribed format. The Act’s rules provide a template – Form No. SH-1 – which outlines the content and layout of a share certificate. Every share certificate must be “in Form SH-1 or as near thereto as possible” (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). In essence, the certificate should include key details such as:

The company’s secretary or share department will fill in these details on a blank certificate form. Many companies print blank certificate stationery (often with the company’s name and logo, and with pre-printed serial numbers) which are then filled out for each issue. According to Rule 7 of the Companies (Share Capital and Debentures) Rules, printing of blank certificate forms must be done with Board authorization and such forms should be consecutively numbered and kept in secure custody (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). This is a security measure to prevent unauthorized or fraudulent issuance using stray blank certificates. All unused forms are like sensitive inventory – the company must account for them.

Also, stamp duty must be paid on share certificates. Under Indian stamp laws, a share certificate is subject to stamp duty (a one-time tax) at a rate prescribed by the state (for example, some states levy 0.1% of the face value or issue price, others a fixed amount per share or per certificate) (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). Companies usually affix impressed stamps or frank the certificates with the requisite stamp duty. It’s illegal to issue a share certificate without paying stamp duty – doing so can render it inadmissible as evidence until duty and penalties are paid. So, part of the preparation includes making sure appropriate stamp duty stamps are affixed or printing a stamp duty notation.

  1. Surrender of Allotment Letter (if applicable): If the shares were issued pursuant to some letter of allotment or fractional coupon (the latter could occur if shares were issued in fractions due to some corporate action), the original document must be surrendered in exchange for the share certificate (Section 46.Certificate of shares. | Companies Act Integrated Ready Reckoner|Companies Act 2013|CAIRR). For example, in older practice, companies sometimes issued an “allotment letter” to an investor upon receiving the application money, which the investor later traded in for the actual share certificate. Rule 5(1)(b) specifies this requirement and provides exceptions: it isn’t needed in cases of issue against letters of acceptance or renunciation (like in rights issues) or for bonus shares (Section 46.Certificate of shares. | Companies Act Integrated Ready Reckoner|Companies Act 2013|CAIRR). If the allotment letter was lost or destroyed, the Board can impose conditions – such as requiring an indemnity bond and evidence – before issuing the certificate (Section 46.Certificate of shares. | Companies Act Integrated Ready Reckoner|Companies Act 2013|CAIRR). In modern practice, allotment letters are not common except in certain scenarios, but the rule exists to cover those cases. For a normal fresh allotment (subscribers at incorporation or new issue) there typically is no separate allotment letter document – the entry in the minutes/register suffices.
  2. Approval and Signing: Once the certificates are prepared, they must be signed by authorized officials of the company. The Companies Act and Rules are very specific about who shall sign share certificates:
    • Common Seal (if any): In the past, affixing the company’s common seal was mandatory on share certificates. After the 2015 amendment, having a common seal became optional. Now, if a company has a common seal and chooses to use it, the certificate should be issued under the seal and the seal should be affixed in the presence of the authorized signatories (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). If the company does not have a seal, or does not use it, the certificate is valid with the required signatures alone.
    • Signatures – General Rule: For most companies, two signatures are required on each share certificate. Either it should be signed by two directors, or by one director and the company secretary (if the company has appointed a CS) (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). This is backed by Section 46(1) and Rule 5(3). Thus, typically you will see two signatories at the bottom of a share certificate – often the Managing Director and the Company Secretary, or in absence of a CS, two directors (maybe the Chairman and one other director). Each signatory’s name and designation is usually printed below their signature line.
    • Signatures – One Person Company (OPC): In a One Person Company (which has only one director by law), the rule is relaxed: it is sufficient for the share certificate to be signed by one director and either the Company Secretary or any other person authorized by the Board (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). So an OPC could, for instance, have the sole director and a witness or an accountant (whom the Board authorizes) sign the certificate. This ensures even companies with minimal personnel can validly issue certificates.
    • Who cannot sign: Only the aforementioned persons (directors, CS, or authorized person in OPC scenario) are permitted signatories. A share certificate cannot be signed by just one director (except OPC case) or by a power of attorney holder or some outsider not authorized by the Board. For example, the company’s banker or auditor cannot sign share certificates – they have no such authority. Even within the company, an ordinary employee cannot sign unless he is also a director or specifically authorized in an OPC context. Historically, rules even required that if the Board has both executive and non-executive directors, at least one of the two signatory directors should be a non-executive (not a Managing or Whole-time Director) to add a layer of oversight. (This specific stipulation appeared in earlier Company Rules but has since been omitted (Section 46.Certificate of shares. | Companies Act Integrated Ready Reckoner|Companies Act 2013|CAIRR), though companies may still follow it as good practice.) In any case, no share certificate is valid unless it meets the signing requirements.
    • Facsimile Signatures: It may not be practical for busy directors to manually sign hundreds of certificates in large issues, so the law permits certain mechanical or digital facsimile signatures. A director is deemed to have “signed” the certificate if his signature is printed or affixed by means of any machine, equipment, or other mechanical means like engraving or lithography, or even if digitally signed, so long as it is not a mere rubber stamp (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). The idea is to allow engraved signatures or digital signatures that are harder to misuse, but disallow simple rubber stamps which could be easily abused. If a facsimile signature is used, the director must personally approve this method and is held responsible for the safe custody of the machine or device that affixes the signature (Section 46.Certificate of shares. | Companies Act Integrated Ready Reckoner|Companies Act 2013|CAIRR). For example, many companies have one director’s signature pre-printed on the certificate stationery (with security safeguards) and the second signatory signs in wet ink; the pre-printed signature counts as a valid signature if done per the rules. Under digital workflows, a company might issue certificates with digital signatures of officials – this is also permitted as long as it’s secure and authorized.

Once signed (and sealed, if applicable), the certificate formally becomes the legal document evidencing the shares.

  1. Entry in the Register of Members: Every time a share certificate is issued, the company must immediately make corresponding entries in its Register of Members (often also called the Share Register). The Register of Members is the primary record of all shareholders, detailing each member’s name, address, and shareholdings (with distinctive numbers of shares, etc.). When a new certificate is issued, the register is updated to reflect the shares now under that member’s name and usually to note the certificate number and date of issue. According to Rule 5(2) and good practice, particulars of every share certificate issued should be entered in the Register of Members (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). This ensures the company’s internal records mirror the certificates handed out. Many companies maintain a column for “Certificate No.” and “Certificate issuance date” in the register next to each allotment or transfer entry. In case of transfers, the register will show the old certificate was canceled (and to whom it belonged) and a new entry for the new holder with the new certificate details.

Additionally, the company must maintain a Register of Share Certificates (or counterfoil book) for administrative purposes. Under Rule 7, companies are required to keep a Register of renewed and duplicate share certificates in Form No. SH-2, wherein details of any duplicate or replacement certificates are recorded with cross-reference to the main Register of Members (Emailing Company Law Additional Question Bank | PDF | Law | Limited Liability Partnership). This register (SH-2) is kept at the registered office (or the same place as the members’ register) and must be preserved permanently under safe custody (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). While SH-2 is specifically for duplicates/renewals, many companies also keep a certificate stub book or electronic log for all certificates (original and duplicates) – akin to a chequebook stub – which records the certificate number, to whom issued, for how many shares, and the old certificate references in case of splits/transfers. Such meticulous record-keeping helps in tracking the history of share ownership and quickly addressing any discrepancies or investor queries.

  1. Delivery to Shareholder: After signing and recording, the share certificate is ready to be delivered to the shareholder. Delivery can be physical (handed over or couriered to the shareholder’s registered address) or, if the shareholder agrees, kept for pickup. In demat cases, there is no physical delivery – instead the company instructs the depository to credit the shareholder’s account.

Throughout this process, security and accuracy are paramount. Companies often have internal checks – for instance, each certificate may be cross-verified against the allotment list by two different officers, and the serial numbers of certificates issued are verified to ensure none are missing or duplicated.

Let’s illustrate the issuance procedure with a scenario: Suppose ABC Pvt. Ltd. has just incorporated, and as subscribers to its Memorandum, Alice is to get 5,000 shares and Bob 5,000 shares. The company holds its first Board meeting and notes that as part of incorporation, Alice and Bob are allotted their shares. A Board resolution is passed to issue certificates to them. The company’s secretary prepares two certificates (perhaps Certificate No. 1 for Alice’s 5,000 shares numbered 1–5000, and Certificate No. 2 for Bob’s shares 5001–10000). The certificates are printed on the company’s certificate paper in Form SH-1 with all required details, stamp duty is paid (say by affixing ₹50 worth of stamps on each, depending on the state’s rate for ₹50,000 of capital value), and they are signed by two directors of ABC (since ABC has no CS yet, being a fresh startup). The details of these shares – Alice and Bob’s names, address, the certificate numbers, share numbers, etc. – are entered into ABC’s Register of Members under folio 1 and 2. Within a few days, ABC’s secretary couriers the share certificates to Alice and Bob. Now Alice and Bob have tangible proof of their shareholding. Six months later, Bob decides to transfer 1,000 shares to Charlie. Bob submits his original certificate to the company along with a share transfer form. ABC’s Board approves the transfer, cancels Bob’s Certificate No. 2 (it’s defaced with “Cancelled” stamp), and issues a new Certificate No. 3 to Charlie for 1,000 shares (distinctive numbers 5001–6000, for instance) and another Certificate No. 4 to Bob for his remaining 4,000 shares (6001–10000). Each new certificate again is authorized and signed. The register is updated: Charlie is added as a member for 1,000 shares (with cert 3) and Bob’s entry is updated to now reference cert 4 for 4,000 shares instead of the old cert 2. The old certificate is kept in records (eventually to be destroyed after 3 years as per rules) (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). This example highlights how certificates are issued not just at incorporation or new issues, but also during transfers (and similarly for transmissions or any change in holding).

Statutory Timeframes for Issuance of Certificates

Issuing the certificate promptly is not only good practice but a legal requirement. Section 56 of the Companies Act, 2013 prescribes strict timelines for delivering share certificates to shareholders in various circumstances, aiming to protect investors from undue delays. The clock starts ticking from the event that gives rise to the entitlement of a certificate (incorporation/allotment/transfer, etc.). Below are the key timelines mandated:

  • Subscribers to Memorandum (at incorporation): The people who subscribe to the company’s Memorandum (the first shareholders of a newly formed company) must be issued their share certificates within 2 months from the date of incorporation (Issue of “ISSUE” of Share Certificate) (Issue of “ISSUE” of Share Certificate). For example, if a company was incorporated on January 1, 2025, the share certificates to the initial subscribers must be delivered by March 1, 2025, at the latest.
  • Allotment of new shares (subsequent to incorporation): Whenever a company allots additional shares (whether under a rights issue, private placement, bonus issue, etc.), it must deliver the share certificates to the allottees within 2 months from the date of allotment (Issue of “ISSUE” of Share Certificate). The “date of allotment” is typically the date the Board resolution to allot shares is passed. So if shares were allotted on July 15, 2025, certificates need to be out by September 15, 2025.
  • Transfer of shares (or securities): In case of a transfer of shares (voluntary sale/gift from one person to another) or transmission (inheritance or operation of law), the company is required to deliver the new certificates within 1 month of the date of receipt of the instrument of transfer (in case of transfer) or from the date of intimation of transmission (Issue of “ISSUE” of Share Certificate). So if Mr. X transfers shares to Ms. Y and the company receives the duly executed transfer deed on August 1, the certificate in Ms. Y’s name should be dispatched by August 31. Likewise, if shares transmit to a heir on a shareholder’s death and the company is informed (with proof) on August 1, the heir’s certificate must be sent by August 31.
  • Allotment of Debentures: For completeness, the Act also covers debenture certificates – these must be issued within 6 months from allotment of debentures (Issue of “ISSUE” of Share Certificate). (Often, debentures are also now issued in demat form for listed companies, but if physical debenture certificates are used, this is the timeline.)

These timelines are encapsulated in Section 56(4) of the Act and the relevant rules. To summarize the statutory deadlines in a concise form:

  • Incorporation (subscriber certificates) – 2 months from incorporation.
  • Any new share allotment – 2 months from allotment.
  • Transfer of shares – 1 month from receipt of transfer instrument.
  • Transmission of shares – 1 month from intimation of transmission.
  • Allotment of debentures – 6 months from allotment.

If the shares are issued in dematerialized form, the requirement of delivering a physical certificate doesn’t apply; instead the company must immediately inform the depository of the allotment or transfer so that the demat account can be credited with no delay (Issue of “ISSUE” of Share Certificate) (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). In practice, “immediately” means within a few days – companies usually file corporate action forms with depositories right after allotment approval so that shareholders see the credit in their accounts perhaps within 1-2 weeks at most.

Adhering to these timelines is critical. A delay might seem like a minor administrative lapse, but it has serious consequences under the law (discussed in the Penalties section). Regulators consider timely issuance as a sign of good governance and investor protection. For instance, a new shareholder having to wait endlessly for a certificate could be impeded from proving their ownership or exercising rights (like voting or selling the shares). That’s why the law fixes these outer limits.

Note: These timeframes apply “unless prohibited by any provision of law or any order of Court/Tribunal” (Issue of “ISSUE” of Share Certificate). This means if a court or regulatory authority has, for example, put a stay on transfer of shares or there’s a legal dispute, the company may defer issuing the certificate until clearance. Otherwise, delay beyond these periods is a violation.

Register of Members, Share Certificate Records, and Form SH-1

As mentioned, the Register of Members is the definitive ledger of share ownership in a company. Maintaining it accurately in tandem with share certificate issuance is a statutory duty:

  • Whenever a share certificate is issued (whether original, split, or duplicate), corresponding entries must be made in the Register of Members, noting the shareholding under the member’s name. This includes updating the list of distinctive numbers of shares held by each member. The certificate number can also be recorded for cross-reference (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times).
  • The Companies Act (Section 88) requires every company to maintain a Register of Members with particulars of every member and the shares held. The Companies (Management and Administration) Rules provide specifics on what information to include (typically in Form MGT-1). Relevant to share certificates, this register will reflect changes like allotments, transfers, and replacement of certificates.
  • Form SH-1 is not a register but the format of the certificate itself. It contains placeholders for the company and shareholder details as outlined earlier. Companies usually print their share certificates based on Form SH-1’s layout. For example, Form SH-1 has a section that reads “This is to certify that [Name of shareholder] is the registered holder of [Number] [type] shares of Rs.[nominal value] each, bearing distinctive numbers from __ to __, comprised in Certificate No. __, issued in lieu of [if it’s a new issue or say in lieu of share certificate no. X on transfer]”. It also has the space for signatures and the company seal. By adhering to “as near thereto as possible”, companies might customize certificates with logos or watermarks, but the core content must be there (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times).
  • Register of Renewed & Duplicate Certificates (Form SH-2): Under Rule 6 and 7 of the Share Capital Rules, if the company issues duplicate certificates (for lost/destroyed ones) or new certificates upon splitting or consolidation of holdings, it must record these in a separate register called the Register of Renewed and Duplicate Share Certificates (which is often kept in Form SH-2 format) (Emailing Company Law Additional Question Bank | PDF | Law | Limited Liability Partnership). This register logs details such as the old certificate that was replaced, the new certificate number, name of person, number of shares, reason for issue (lost, split, etc.), date of approval by Board, and date of issue. It helps keep a trail of how many certificates have been re-issued and to prevent misuse (for instance, if someone later finds an “old” lost certificate, the register will show that a duplicate was already issued and the old one is null and void). SH-2 is to be maintained at the registered office (or wherever the main members register is maintained) and must be preserved permanently (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times), with entries authenticated by the Company Secretary or an authorized director (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). Essentially, a duplicate certificate issuance is something that stays on record forever for audit trail.
  • Preservation of Certificate Stubs and Records: All books and documents relating to the issue of share certificates (including the blank certificate forms and surrendered certificates) must be preserved in good order for at least 30 years (and if any legal dispute is ongoing, they should be kept permanently) (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). Any certificate that is surrendered or defaced (say, an old certificate returned on transfer) should be immediately canceled by stamping “Cancelled” on it and can be destroyed after 3 years with Board approval (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). These provisions ensure even decades later, there’s evidence of the original issuances. For example, if in 2040 a question arises about whether a share was properly allotted in 2020, the company should have the stub or electronic record proving the certificate issuance back then.

Why all this record-keeping? Because shares are valuable and can change hands many times, the paperwork trail must be robust. Just as a bank keeps records of issued checkbooks and canceled checks, a company keeps track of issued certificates and canceled ones. This protects against fraud (e.g., someone trying to use a canceled certificate to claim ownership) and helps resolve any discrepancies. SEBI and stock exchanges also require listed companies to reconcile their share capital periodically, which means the total shares in members’ register and in physical certificates must match the total issued capital and what depositories show. Any break in record-keeping could lead to serious imbalances or even enable fraud (like infamous cases where rogue company staff issued fake share certificates in the past – strict protocols now largely prevent that).

Who Signs the Share Certificates and Under What Authority

As highlighted, share certificates must be signed by authorized officers of the company. Let’s consolidate the rules around signing:

In case of an OPC, one director plus either the CS or another authorized person will suffice (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times).

The board of directors typically designates which officials will sign. Often, companies pass a Board resolution to specify the officers who are authorized to sign share certificates. For example, “Resolved that any two of the following: Mr. A (Managing Director), Mr. B (Director), and Ms. C (Company Secretary) be authorized to sign share certificates of the company”. This ensures clarity on who can execute the certificates on the company’s behalf.

  • Role of the Common Seal: If the company uses a common seal, the certificate should be embossed with the seal in the presence of those signing (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). Historically, share certificates of companies invariably carried the seal, and the signatories would sign to attest the sealing. After 2015, many companies (especially private ones) have done away with the seal to simplify documentation. Now, a certificate with the required signatures is valid even without a seal (the words “issued under common seal” in Section 46(1) have been omitted) (Section 46.Certificate of shares. | Companies Act Integrated Ready Reckoner|Companies Act 2013|CAIRR). In practice, some companies still like to affix a seal as a tradition or extra security measure – that’s optional.
  • Restrictions on Signatories: At least one of the signatories must be a director in all cases (except OPC where the sole director’s signature with an authorized person is allowed). A Company Secretary alone cannot issue a certificate without a director’s signature alongside. Also, one individual cannot sign in two capacities – e.g., if Mr. X is both a director and the Company Secretary, he can’t sign twice; you’d need another director or authorized person as the second signature.

Previously, the rules said that if the company has both managing/whole-time directors and ordinary directors, at least one signatory should be an ordinary (non-executive) director (Section 46.Certificate of shares. | Companies Act Integrated Ready Reckoner|Companies Act 2013|CAIRR). Although this clause was later removed, its spirit remains a good check – it prevents a situation where only executive management signs off share certificates without any independent oversight. Many companies voluntarily adhere to this by involving a non-executive director or a director from a different department.

  • Authority for Signing: The authority flows from the Board resolution. Section 46(1) read with the Rules essentially mandates board approval for the issuance and the persons signing. If a certificate were signed by someone not authorized, it would be deemed improperly issued. For instance, a signature by a “director” implies a person who currently holds that office. If a person ceased to be director but their facsimile signature was still used, that could be problematic unless quickly corrected.
  • Share Transfer Agents (STAs) or RTAs: In the case of listed companies or large public companies, they often employ professional Registrars and Transfer Agents to handle the share certificate processing. RTAs may have their officers co-sign certificates as “authorised by board”. Strictly speaking, the law doesn’t explicitly list an RTA officer as eligible signatory unless that person is also a director or CS or in OPC context. However, what listed companies do is have one director (or often an executive like the company secretary or a director) and one senior RTA official who is given a title like “Authorized Signatory” (through a board resolution) sign the certificates. Since the rule for non-OPC doesn’t list “any person authorized by board” except in presence of a CS, many companies simply ensure their Company Secretary is one of the signers and a director the other, even if the actual paperwork is managed by RTA. The RTA may pre-print the director’s facsimile signature and have the CS sign wet ink, for example.
  • Consequences of Improper Signing: If a share certificate isn’t signed as required, it may be considered void or at least not valid evidence of title. Say a certificate accidentally got out with only one signature – the shareholder should request a duly signed replacement. Internally, the company would treat the improperly signed one as invalid and issue a corrected certificate. This is more an exception scenario, as companies are careful about this.

In summary, the signing of share certificates is a formal act executed by the agents of the company’s board. It signifies that the company (through its board) vouches that the named person is entitled to the shares stated, as per the company’s records. It’s a bit like officials signing a diploma or a property deed to give it authenticity.

Duplicate, Split, and Consolidated Share Certificates

Life happens – share certificates can get lost, stolen, damaged, or shareholders might want to split one large certificate into smaller ones (or vice versa). The Companies Act and rules provide for these situations, but with careful conditions to prevent fraud.

Duplicate Certificates (Loss or Destruction):

If a share certificate is lost or destroyed, the shareholder can request a duplicate certificate from the company. This is a sensitive matter because a lost certificate could theoretically be found by someone else and misused. So the law (Section 46(2) and Rule 6) sets conditions:

  • The loss or destruction must be proved by the shareholder to the company’s satisfaction (for example, by way of an affidavit, FIR copy if theft/loss was reported, etc.). The company may require indemnity – a security against potential misuse of the original turning up. The Board of Directors’ prior consent is required before issuing any duplicate (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times), which means it must be taken up in a board meeting.
  • The company can charge a reasonable fee for issuing duplicate certificates (the fee is often nominal, perhaps ₹50 or ₹100 per certificate, as allowed by the Articles or decided by the Board) (Emailing Company Law Additional Question Bank | PDF | Law | Limited Liability Partnership). This deters frivolous requests and covers administrative costs.
  • If all is in order, the company issues a new certificate marked “Duplicate”. Rule 6(3) states that the duplicate certificate shall be clearly stamped or printed with the word “Duplicate” (and if it’s issued in place of a lost one, often the certificate will mention “issued in lieu of Certificate No. __ which was lost” on its face) (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). Correspondingly, in the Register of Members and the duplicate certificate register, a note is made that duplicate certificate no. XYZ was issued on this date in lieu of original no. ABC (lost).
  • Timeline: The law prescribes a timeline even for duplicate issues: For unlisted companies, a duplicate share certificate must be issued within 3 months from the date of submission of complete documents for the request. For listed companies, the duplicate certificate (or rather, the outcome of the request, which nowadays may be a demat credit) must be issued within 45 days of submission of documents (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). These shorter periods for listed entities align with SEBI’s service standards. For example, if you lost your share certificate and submitted the required affidavit/indemnity on Jan 1, an unlisted company should issue the duplicate by April 1 latest, but a listed company should do so by Feb 15. In fact, SEBI has recently pushed that such issuance in listed companies should happen in demat form – meaning instead of giving a new physical certificate, the company may directly credit your demat account with the shares (after blocking the lost certificate).
  • The duplicate certificate, once issued, replaces the original for all purposes – the original, if ever found, is rendered void and cannot be used to claim ownership. Companies sometimes publish public notices when issuing duplicates as an extra caution (though not mandatory by law, some do it especially if the value is significant, to alert that the old certificate is no longer valid).

Split or Consolidation of Certificates:

Sometimes shareholders may have a legitimate need to split their share certificates or consolidate them:

  • Splitting (Subdivision): If a shareholder holds, say, one certificate for 1,000 shares, he might want it split into two certificates of 500 shares each (perhaps to gift some shares, or simply to hold them in different folios). As long as the total number of shares and the shareholder remain the same, the company can issue split certificates. The procedure is akin to issuing new certificates against surrender of the old one. Rule 6 covers this as issuing a “renewed” certificate. The original certificate must be surrendered and canceled, and new certificates (marked as “Issued in lieu of certificate no. __ on subdivision”) are issued (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). There’s usually no regulatory fee for splits, though some companies might charge a small amount per new certificate (within limits set by their Articles).
  • Consolidation: Conversely, if a shareholder has multiple small certificates, he may request one big certificate consolidating all his holdings. For example, if Ms. Y has 10 certificates each for 100 shares, she might prefer one certificate for 1,000 shares. The company will take back the 10 certificates and issue one consolidated certificate. This is often done on request to reduce paperwork (and in earlier times, to save on dealing with many dividend warrants, etc.).
  • In both split and consolidation, it’s important that the shareholder and class of shares are the same. You can’t consolidate shares of two different shareholders obviously, and you wouldn’t consolidate an equity share certificate with a preference share certificate since they are different classes.
  • The new certificates arising from split or consolidation are also annotated appropriately (e.g., “Issued in lieu of certificates no. X, Y, Z consolidated”). And the register entries are adjusted accordingly.
  • From a legal standpoint, a split or consolidated certificate is technically a “renewed” certificate, not a “duplicate” (duplicate is specifically for lost/defaced). But practically, the issuance process and treatment in records is similar: they require Board approval and must be logged in the Register of Renewed & Duplicate Certificates (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times).
  • Defaced/Mutilated Certificates: If a certificate is torn, worn out, or mutilated but still partly legible (say the dog chewed up a corner of it or it got water-damaged), the shareholder can surrender it and request a fresh certificate. This is also treated as a renewal – the damaged certificate is given up (so the company has it to verify authenticity) and a new one is issued, marked “in lieu of old certificate mutilated” (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). The company might charge a fee depending on its policy. Essentially, as long as the company gets the old certificate (or what remains of it), it is a straightforward re-issuance, since the risk of someone else holding the old one is eliminated by surrender.

In all these cases, Board approval is needed before the new certificates are issued. The Board will review the request and, especially for lost cases, consider the evidence and indemnities. The resolution will typically say: “Resolved that in view of share certificate No. 50 for 100 shares in the name of Mr. Q being reported lost and upon receipt of an indemnity bond, the company do issue a duplicate share certificate to Mr. Q for the said 100 shares, and the original if found shall be void.” Similar resolutions cover splits or consolidation (though those are simpler, basically acknowledging receipt of original certificates and approving new ones).

The law imposes a heavy penalty for fraudulent or improper issue of duplicate certificates. Section 46(5) states that if a company issues a duplicate certificate with intent to defraud, the company is punishable with a fine not less than five times the face value of the shares (so if the certificate was for shares of face value ₹1 lakh, minimum fine ₹5 lakh) and up to ten times the face value or ₹10 crores, whichever is higher (Section 46.Certificate of shares. | Companies Act Integrated Ready Reckoner|Companies Act 2013|CAIRR). Officers in default are also personally liable under Section 447 (which deals with fraud and can entail imprisonment). This is a very stringent punishment, reflecting the seriousness of potential fraud – for instance, issuing a duplicate to someone who colluded with an insider while the real owner’s certificate is intact, effectively creating a fake claim. Such a scenario would be outright fraud and invites draconian penalties. Thankfully, such cases are rare and the oversight mechanisms (like the registers and approvals we discussed) are designed to prevent them.

SEBI Circulars and Listing Regulations:

For listed companies, SEBI has supplemented the Companies Act with additional requirements to protect investors dealing with share certificates:

  • SEBI’s Listing Obligations and Disclosure Requirements (LODR) regulations echo similar timelines for processing requests like transfers, splits, and issuance of duplicates. For example, before physical transfers were phased out, Regulation 40 stipulated that transfer requests be processed within 15 days. For duplicates, the timelines (45 days) align with the Companies Act rule (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times).
  • A recent SEBI circular (circa January 2022) mandated that listed companies issue securities in demat form only when handling investor service requests such as duplicate certificates, split, consolidation, or transmission. This means if you approach a listed company’s RTA for a duplicate, they will likely not give you a new physical certificate but instead credit your shares to a demat account (you’d need to provide demat details). The goal is to eventually eliminate physical certificates, which are prone to loss/fraud, and ensure all investors hold shares in demat for easy tracking.
  • SEBI also requires listed companies to maintain a share transfer facility (through RTAs) and to report compliance in handling transfers and related requests. There used to be a requirement of a quarterly audit (by a practicing CA/CS) to certify that all transfers, transmissions, issue of duplicates, etc., were completed within the stipulated time. Delays or investor complaints can attract penalties from stock exchanges.

In one SEBI-related example, there were instances in the past of shareholders complaining that despite submitting all documents for a duplicate certificate, the company took an inordinately long time. SEBI can direct the company to resolve it and may impose fines if the delay violates the 45-day rule. Moreover, SEBI has an online SCORES platform where investors can lodge complaints about such matters, pushing companies to act quickly.

Case Laws and Examples of Irregularities

Timely and proper issuance of share certificates is not just a procedural nicety – companies have faced regulatory action and penalties for failing to comply. Let’s discuss a couple of real adjudications and scenarios that highlight the importance of compliance:

  • Delay in Issuing Certificates to Subscribers: T. Forrest & Sons India Pvt. Ltd. (2022) – This was a case where a company delayed issuing share certificates to its initial subscribers by 17 days beyond the 2-month limit. The company actually applied for compounding of the offense, effectively admitting the default. The Regional Director directed it to go through adjudication under Section 56. The Registrar of Companies (ROC) imposed a penalty of ₹25,000 on the company and each officer in default (Issue of “ISSUE” of Share Certificate). The fine was ₹25k (instead of ₹50k) in this case because the company was classified as a “small company” and benefited from Section 446B which allows lesser penalties for small companies (Issue of “ISSUE” of Share Certificate). This case underscored that even a short delay (just a couple of weeks) in issuing certificates is taken seriously and attracts monetary penalties.
  • Delayed due to Non-payment by Subscriber: Tejas Cargo India Ltd. (2022) – In this instance, the company waited to issue subscriber certificates because the subscribers had not paid for the shares (subscription money delay of 74 days). They overshot the 2-month limit, issuing certificates only after payment was received, which was about 74 days late. The company pleaded that the delay was due to late receipt of money. However, the authorities held that the law does not allow delay even if payment is pending – the requirement is unconditional. The ROC levied a penalty of ₹50,000 each on the company and its officers (Issue of “ISSUE” of Share Certificate) (since this was not a small company, no reduction). The outcome highlights a crucial point: under Section 10A, a company has 180 days to receive subscription money (else its registration may be canceled), but the share certificates to subscribers must still be issued within 2 months regardless (Issue of “ISSUE” of Share Certificate). If the subscriber ends up not paying, the remedy for the company is to call the money and eventually forfeit the shares (as per its Articles) (Issue of “ISSUE” of Share Certificate) (Issue of “ISSUE” of Share Certificate), not to delay issuing the certificate. Essentially, the law forces companies to formally recognize subscribers as shareholders (with certificates) quickly and then use share forfeiture procedures if they default on payment, rather than withholding certificates as leverage.
  • Penalty Provision in the Act: Section 56(6) of the Companies Act, 2013 lays down a uniform penalty for defaults in delivering certificates on time. If a company fails to comply with the timelines (2 months, 1 month, etc. as applicable), the company and every officer in default are liable to a penalty of ₹50,000 each (Issue of “ISSUE” of Share Certificate) (Issue of “ISSUE” of Share Certificate). This is a fixed penalty – unlike some other offenses, there is no range; ₹50k is levied per defaulting party. Prior to amendments, there used to be perhaps smaller fines or different ranges, but now it’s quite clear-cut. As noted, Section 446B allows a halved penalty (₹25k) for small companies and startups in such cases (Issue of “ISSUE” of Share Certificate) (Issue of “ISSUE” of Share Certificate).

It’s important to note this is an adjudication penalty, not a criminal court fine – meaning the ROC or an adjudicating officer can levy it through a relatively fast process. There is no imprisonment for this default in itself, but non-payment of penalty or continuous default could escalate matters.

  • Share Certificate as Evidence in Court: There have been numerous cases where the possession or absence of a share certificate influenced a court’s decision on ownership. For example, in disputes over whether a transfer was registered, courts have looked at whether a new certificate was issued to the transferee. Indian courts have also applied the principle of estoppel (from the famous English case Balkan Rope and others) which in company law says: if a company issues a share certificate representing certain facts (like X is owner of Y shares, fully paid up), and a third party relies on that certificate to their detriment, the company may be estopped from denying those facts later. This is to protect bona fide purchasers of shares. However, this principle has limits, since share certificates are not negotiable instruments – the purchaser still must ensure the transfer is registered.
  • Forgery and Personation: If someone forges a share certificate or impersonates a shareholder to induce the company to issue a duplicate, etc., that’s a criminal offense. The Companies Act has a Section 57 which deals with personation of shareholders – i.e., if anyone deceitfully personates as the owner of shares or any interest in a company, they can be punished with imprisonment (up to 5 years) and fine. This could apply if, for example, someone fraudulently obtained a duplicate certificate claiming to be the shareholder. While such instances are rare due to the safeguards, the law has these teeth to dissuade any such attempts.
  • SEBI vs. Companies – Old Physical Shares: In the era of dematerialization, one significant “case” was the regulatory push by SEBI to invalidate transfer of physical shares after 2019. Though not a case law from court, it’s worth noting because investors who didn’t heed this change found themselves stuck. SEBI had to issue multiple reminders and even extended the deadline once. Post-deadline, if an investor sent a physical transfer form to a company, the company would return it advising to demat. This caused some grievances but was ultimately for greater good.

In summary, non-compliance with share certificate rules can lead to penalties and reputational damage. On the flip side, compliance builds trust – companies that promptly send out share certificates and maintain clear records rarely face disputes from their shareholders on ownership issues.

Conclusion

Share certificates may appear to be just pieces of paper, but under the Companies Act, 2013 they carry significant legal weight and require diligent handling. They encapsulate the relationship between a company and its members, symbolizing ownership in the company. Whether in a small startup or a large public company, the principles remain the same – every shareholder is entitled to a properly issued certificate (or demat credit) as proof of their shares, and without delay.

For private and unlisted companies, physical share certificates are still very much the norm and form the backbone of shareholder relations. For listed companies, while the demat system has overtaken physical certificates, the legacy certificates and any newly issued ones (for splits, etc.) are governed by these rules to protect investors. The importance of share certificates also extends to corporate actions – one cannot participate in share transfers, inherit shares, or exercise shareholder rights without the underlying issuance and records being correct.

From a compliance perspective, a company secretary or legal professional must ensure:

  • Proper board resolutions are in place for every share issue.
  • Share certificates are prepared in the prescribed format with all details and duly signed by authorized persons.
  • Statutory time limits are strictly observed – diarize that 2-month or 1-month deadline the moment shares are allotted or a transfer comes in.
  • All registries and records (Registers of Members, SH-2 for duplicates, etc.) are updated and safely maintained.
  • Security measures (like numbered certificate stationery, safe custody, cancelled certificates defaced) are followed to the letter, to prevent any misuse.

By following the law and best practices, companies can avoid penalties and ensure their shareholders have confidence in the documents that represent their stake. In the words of an old company law adage, “The registers of the company are the proof of membership, and the share certificate is the key to that register.” Thus, handling that key with care is paramount. Should any disputes or issues arise, the robust compliance with procedures and documentation will serve as the company’s defense and the shareholder’s assurance.

In a world moving toward paperless records, the share certificate’s traditional role is evolving, but its essence under Companies Act, 2013 – as the prima facie evidence of ownership – remains firmly in place (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times). Whether on parchment or in pixels, the rights of members hinge on proper issuance and recognition of these certificates. Companies that treat share certificates not as a formality but as a fundamental legal duty will foster better governance and trust among their investors.

References: The above guide references the relevant provisions of the Companies Act, 2013 (Sections 44, 45, 46, 56, etc.) and the Companies (Share Capital and Debentures) Rules, 2014 (Rules 5, 6, 7) which govern share certificates. It also incorporates insights from professional analyses (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times) (Compliance Checklist for Issue of Share Certificates Under Companies Act, 2013 | SCC Times) and recent enforcement cases (Issue of “ISSUE” of Share Certificate) (Issue of “ISSUE” of Share Certificate) to illustrate the application of these laws in real situations. By understanding both the letter and spirit of these requirements, one can ensure that the process of issuing share certificates is smooth, legally sound, and transparent for all stakeholders involved.

 

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