ComplianceSupport

Every Company having share capital is required to issue share certificates to its shareholders. Below are certain rules that the Companies are required to be follows

A document called Certificate of Shares is required to be issued by the Company to the allottees and transferees to effect that such allottees or transferees hold a certain number of shares of the Company showing their nominal and paid-up values and distinctive numbers. Such a certificate is evidence of the title of the person holding the shares. The certificates shall require to be issued where shares are held in physical form. Such Certificate shall be issued, in Form SH-1 as prescribed under Companies (Share Capital and Debenture) Rules. 

1. in pursuance of a resolution passed by the board; and
2. on surrender to the company of the letter of acceptance or of remuneration, or in case of issue of bonus shares

As per Regulation 40 (3) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, on receipt of proper documentation, the listed entity shall register transfers of its securities in the name of the transferee(s) and issue certificates or receipts or advice, as applicable, of transfers; or issue any valid objection or intimation to the transferee or transferor, as the case may be.

Duplicate Share Certificate may also be issued if such certificate:

1. is proved to have been lost or destroyed; or
2. has been defaced, mutilated, or torn and is surrendered to members and other matters shall be such as may be prescribed.

Period within which Certificates to be issued:

Certificates shall be issued within a period of:

1. Two months from the date of Incorporation;
2. Two months from the date of allotment in case of Allotment;
3. One month from the date of receipt of the request of Transfer or Transmission by the Company;
4. In case of the listed entity, Fifteen days from the date of the request for transfer;

The listed entity shall ensure that transmission requests are processed for securities held physical mode within twenty-one days after receipt of the specified documents.

As per Regulation 40 (8) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, in case the listed entity has not effected transfer of securities within fifteen days or where the listed entity has failed to communicate to the transferee(s) any valid objection to the transfer, within the stipulated time period of fifteen days, the listed entity shall compensate the aggrieved party for the opportunity losses caused during the period of the delay. And during the intervening period on account of delay in transfer, the listed entity shall provide all benefits, which have accrued, to the holder of securities in terms of provisions of Section 126 of Companies Act, 2013 and Section 27 of the Securities Contracts (Regulation) Act, 1956.

Certificate of Practicing Company Secretary: Reg. 40 (9) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, the listed entity shall ensure to produce a certificate from a Practicing Company Secretary within one month of the end of each half of the financial year, certifying that all certificates have been issued within thirty days of the date of lodgement for transfer, sub-division, consolidation, renewal, exchange or endorsement of calls/allotment monies.

The Practicing Company Secretary shall have to certify that within 30 days, from the date of lodgement of requests, all the certificates have been issued. However, the same SEBI (Listing Obligations and Disclosure Requirements) Regulations provides different-different time periods for the issue of a certificate in a different request like in case of transfer it is of 15 days, in the case of transmission it is of 21 days and for consolidation, renewal, etc., it is of 30 days. 

It is advisable to the Practicing Company Secretary, to divide the certificate into two parts, one for the request of transfer and transmission and second for other requests and certify for the time period of the maximum period of 15 days, 21 days and 30 days respectively.

Manner of Issuing Share Certificates:  Every Share certificate shall be issued under the seal if any which shall be affixed in presence of and signed by:

1. Two directors duly authorized by the BoD for the purpose or committee of the Board, if so authorized by the board; and
2. The secretary or any person authorized by the board.

Further provided that, if the company has no common seal, the share certificate shall be signed by two directors or by a director and Company Secretary, wherever the Company has appointed a Company Secretary. However, note that in such a case, the Certificate is also required to be signed by an Authorised Signatory duly authorized by the Board in this regard. 

Where the Company has a Managing Director or Whole Time Director, at least one of the two directors signing the certificate shall be other than Managing Director or Whole Time Director. Therefore, in every case, the Certificate shall be signed by at least one director, other than Managing Director or Whole Time Director.

In the case of One Person Company, the Share Certificate shall be issued under the seal, if any, of the Company which shall be affixed in the presence of & signed by one director or person authorised by the board of directors of the Company or by Company Secretary or by any authorised person and in case the One Person Company doesn't have common seal, the Share Certificate shall be signed by the person in presence of whom the seal is required to be affixed.

As per explanation of Sub-rule 3 of Rule 5 of Companies (Share Capital and Debenture) Rules, a director shall be deemed to have signed the Share Certificate if his signature is printed thereon as a facsimile signature by means of any machine, equipment, or other mechanical means such as engraving in metal or lithography, or digitally signed, but not by means of a rubber stamp, provided that the director shall be personally responsible for permitting the affixation of his signature thus and the safe custody of any machine, equipment or other material used for the purpose.
Therefore, now the directors are allowed to digitally sign the Share Certificates or in any other mechanical manner. However, such facility is not available for the Company Secretary or the Authorised Signatory.

The word ''a director'' includes both the directors as per the DCA Clarification dated 1st July, 1963. Such Clarification will remain relevent for the purposes of Companies Act, 2013 also, in view of Clause (b) of Sub-section (2) of Section 465 of the Act, 2013. 

Record to be Maintained: The particulars of every share certificate issued in accordance with sub-rule (1) shall be entered in the Register of Members maintained in accordance with the provisions of Section 88 along with the name(s) of person(s) to whom it has been issued, indicating the date of issue.

In the case of listed entity, proper verifiable dated records of all correspondence with the investor shall be maintained by the listed entity.

Stamp Duty Payment: In terms of Section 3 of the India Stamp Act, 1899, the Share Certificate is also liable for Stamp Duty. Being a State subject, the stamp duty varies from State to State. 

Issue of Duplicate Share Certificate will be published separately.

By Team