Share Certificate and Share Warrant: Explanation

October 28, 2020January 16, 2023 Priyanshi Shah 0 Comments

Share Certificate

Share certificate is a certificate issued to the members by the company, under a common seal of the company, if any, or signed by two directors or by a director and company secretary, specifying the number of shares held by him and the amount paid on each share. A share certificate is the proper documentary evidence of title in the possession of the shareholder. It is prima facie evidence of his title to the shares.

Where shares are held in depository form, the record of the depository is the prima facie evidence of the title of the person in the interest of the beneficial owner.

Note: A share certificate is issued to a member of the company only for the physical shares and not for the electronic shares.

Contents of Share Certificate:

Name of the company, CIN, registered office address
Folio number
Share certificate number
Name of member
Nature of share, number of shares, distinctive number
Amount paid on shares
Common seal
Stamp and signature

Numbering of Shares:

Every share in a company having a share capital shall be distinguished by its distinctive number, which creates a distinct identity of a share.

Issue of share certificates:

When a company issues any capital, no share certificate shall be issued except in pursuance of a board resolution and on surrender to the company of its letter of allotment.

Form of Share Certificate:

Rule 5(2) of the companies rules, 2014 provides that every share certificate of share be in form No. SH 1 or as near thereto as possible and shall specify-

Name of the person in whose favor the certificate is issued
The amount paid-up thereon
Name of the company and
Date of issue

In case of listed companies, the size, forms and contents of the share certificate have to be approved by the concerned stock exchange before it is issue to the public.

Duplicate Share Certificate 46(2):

Duplicate share certificate shall be issued if-

It is proved that the original certificate is lost or destroyed.
If it is torn or such torned certificate is surrendered to the company.

Also Read: How To Buy Shares [Complete Guide]

Provisions:

In case of certificate is lost or destroyed:

Prior consent of the board is requested
Proper evidence to the satisfaction of the company is furnished
Company may charge fees for duplicate share certificates as the board decides.
Out of pocket expenses estimated to be incurred by the company in investigating the evidence, as the board may think fit, are deposited with the company.

In the case of certificate torned:

Renewal to be made only on surrender of the old certificate.
Company may charge fees.

Share Warrant:

Share warrant is the document issued by the company under a common seal, it is a bearer entitled to the share or stock specified therein.

It is a negotiable instruments.
They are transferable by mere delivery without registration of transfer.
The shareholder will have the rights to dividend but will not have the right to interference with the internal affairs of the company.
Shareholder will be considered as bearer not as registered.
Share warrant is issued only against fully paid up shares or against the stocks.
After the collection of the amount if the shareholder wishes, the company can issue share warrant against the share certificate.
It can be only issued by the public company having share capital. A private company cannot issue a share warrant.
The company’s articles must provide for the issue of share warrants and the company obtains the consent of the central government before it issues any share warrant.
The number of shares in a share warrant is not included in the qualification shares of directors.
When a share warrant is issued, the name of the shareholder is struck off from the company’s register of members and the bearer of the certificate is no more a member of the company.
The bearer of a share warrant is only deemed to have the rights of a member if, and to the extent, the articles of the company authorize such rights.

A share warrant is an assurance from the company about the ownership of shares and has a dividend coupon attached to it. The bearers of a share warrant are paid the dividend through the coupon. The bearer of the share warrant does not have the right to make an application during the winding up of the company.

Also Read: Equity Share: Features, Types, Advantages, Disadvantages