A company issues a share certificate as evidence of the fact that the shareholder has the ownership of the shares. Further, the Companies Act, 2013, mandates the issuance of share certificates after the incorporation of the company in Form SH1. In this article, we will look at the procedure for issuing a share certificate. We will also look at the format of Form SH1.
Understanding shares and share certificate
According to Section 2(84) of the Companies Act, 2013-
A “share” means a share in the share capital of a company and includes stock.
Every company has a share capital. Further, it can use it to raise funds in exchange for issuing shares in the company. Also, once the shares are issued, the company needs to provide a document that evidences that the person named in the document is the owner of the number and type of shares specified. This document is the share certificate.
The timeframe for issuing a share certificate
- Post-incorporation, a company must issue the share certificates within two months from the date of incorporation.
- If the company has allotted additional shares to new or existing shareholders, then it must issue the share certificates within two months from the date of allotment.
- If the shares are transferred to another person, then the company must issue or endorse a share certificate within one month from the date of receipt of the instrument of transfer.
Details present on the share certificate – Form SH1
According to Rule 5 of the Companies (Share Capital and Debentures) Rules, 2014, a company must issue every share certificate in Form SH1 or as similar to Form SH1 as possible. Also, the certificate must specify-
- The name(s) of the person(s) in whose favour the certificate is issued
- The shares to which the certificate relates to
- The amount paid-up thereon
Signature on the share certificate
According to Rule 5 specified above, a company must affix its common seal, if any, on every share certificate. Further, every share certificate needs to carry the signature of-
- Two directors; or
- One director and the company secretary (if the company has appointed a company secretary)
Also, if the company has a common seal, the company must affix the seal in the presence of the persons signing the share certificate.
The process for issuing a share certificate in Form SH1
The process for issuing share certificates in Form SH1 is as follows:
Allotment of Shares
A company calls for a board meeting to decide the allotment of shares. Once the Board passes the resolution for allotting shares to the shareholders approved for allotment, the company secretary sends letters of allotment to the respective applicants. Also, this letter is treated as the interim share certificate until the company issues the share certificate in Form SH1.
Transfer of Shares
An existing shareholder can transfer his shares to another person. Also, in such cases, a fresh share certificate is NOT issued to the new shareholder. Instead, his name is entered at the back of the certificate and signed by the authorised signatory.
Stamp Duty
Whenever Company issues fresh share certificates on the allotments made, stamp duty is payable on such share certificates as per the Stamp Act applicable in the state where the company has its registered office. Also, Shareholders are required to pay the stamp duty on the total consideration amount in case of transfer of shares which is applicable as 25 paise for every Rs 100 or part thereof.
Format of Form SH1
The format of Form SH1 is as follows:
Form No. SH-1
Share Certificate
[Pursuant to sub-section (3) of section 46 of the Companies Act, 2013 and rule 5(2) of the Companies (Share Capital and Debentures) Rules 2014]
…………………………………….Limited/Private Limited
……………….………. (Corporate Identification Number)
(Incorporated under…the Companies Act, 1956/2013)
Registered Office: …………………………………………………………………
This is to certify that the person(s) named in this Certificate is/are the Registered Holder(s) of the within mentioned share(s) bearing the distinctive number(s) herein specified in the above named Company subject to the Memorandum and Articles of Association of the Company and the amount endorsed herein has been paid upon each such share.
| EQUITY SHARES EACH OF RUPEES ……………………. (Nominal value)
AMOUNT PAID-UP PER SHARE RUPEES ………………….. |
| Register Folio No: Certificate No: Name(s) of the Holder(s):
No. of shares held:…………………………… …………………………….. (in words) (in figures) Distinctive No. (s): From……………………………. To……… (Both inclusive) |
Given under the common seal of the Company this……….. day of…… 20…..
(1) Director:
(2) Director:
(3) Secretary/ any other authorized person:
Note: No transfer of the Share(s) comprised in the Certificate can be registered unless accompanied by this Certificate.
Summing Up
As a company, it is important to comply with the provisions regarding the issuance of share certificates in Form SH1. Further, any default is met with a fine levied to the company as well as every defaulting officer. Finally, we hope that this article helped you understand the process for the issuance of a share certificate in Form SH1. For any queries, please feel free to write to us.
