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A share certificate refers to a document which is issued by a company evidencing that a person named in such certificate is the owner of the shares of the Company as stated in the share certificate. The Indian Companies Act mandates companies for issuing share certificates post their incorporation.
Every share certificate issued in India should contain the below mentioned:
After the incorporation of the company, the company needs to issue the share certificates within two months from the incorporation date. Where additional shares are allotted to the new or existing shareholders, the share certificates should be issued within two months from the allotment date. In a case related to the share transfers, the share certificates should be issued to transferees within a period of one month of receipt of the instrument of transfer by such Company.
A board meeting is called for deciding about the allotment of shares. The board of directors assigns a committee of directors known as the allotment committee. The allotment committee would then decide about the allotment of shares.
Once the allotment committee provides its report with respect to the allotment of shares, the Board then approves such report and then passes the resolution for allotting shares to the respective applicants. Once shares are allotted by the allotment committee, the company secretary sends the letters of allotment to the respective members. The allotment letter refers to a letter that notifies the applicant that the company has allotted a certain number of shares to him. This letter of allotment is considered as the share certificate till the issuance of the final certificate.
The company secretary then prepares a Register of members from the lists of applications received and allotment sheets. Register of member provides information about the shareholders and details of the shares which are allotted to them.
The company secretary must arrange the form of the share certificate according to the form suggested by the Articles of Association. The secretary must get the form printed together with all the required details as per the provisions of the governing law. The secretary needs to fill in all the details in the share certificate with help of the application register and allotment sheets.
The secretary also needs to ensure that the share certificate is signed by two directors of the company. The secretary needs to sign the share certificate. The secretary also needs to ensure that the company’s seal and revenue stamp is affixed on each of the share certificates. Once certificates are in order, a board meeting is called for passing the resolution for issuing share certificates.
The company secretary needs to inform all the shareholders that share certificates are ready and would be delivered in exchange of allotment letters and bankers receipt confirming payment of the allotment money. Public notice should be issued for the general information of the members. Members who surrender their allotment letters, share certificate are dispatched by the registered post to them. The local shareholders as per their preference can also collect the share certificates personally from company’s registered office or from agency appointed for dispatching the share certificates.
Where a company makes any default in complying with provisions relating to issue of share certificates, such company would be punishable with a fine that wouldn’t be less than INR 25,000 but could extend to INR 5,00,000 and every defaulting officer of such company would be punishable with a fine that wouldn’t be less than INR 10,000 but could extend to INR 1,00,000.