Share certificate

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 Company as stated in the share certificate. Within two months after the allotment of shares or one month after lodgement of a transfer of shares, a corporation is required to complete, have ready for delivery, and send or deliver share certificate in relation to those shares. This requirement does not apply in the case of uncertificated shares which are covered by the operating rules of a clearance and settlement facility. The certificate must state the name of the corporation and the amount if any, which is unpaid on the shares. Once it has issued a share certificate which complies with the section, a corporation is estopped from denying that the person named in certificate is the shareholder, is entitled to those shares, or has paid the amount stated. If a director, officer or agent of the corporation issues a forged share certificate, then a third party who has no actual knowledge of the forgery can assume that document is genuine, that is has been issued under proper authority.

Information provided on the share certificate

The share certificate contents:

• Name
• Fully address of the registered office of the company
• Name and the address of the shareholders
• Number and class of shares
• Distinctive number of shares
• Day and date of the issue of certificate
• Certificate number

It is issued under the common seal of the company, be affixed in the presence of the two directors and the secretary and property appointed attorneys. All these persons sign the share certificate which also bears a revenue stamp.

Rules controlling the issuance of a share certificate

Rules that have been issued by the government to strictly control the issuance of share certificates are as follows:

• Issue of Share Certificates - the board of directors must pass a resolution for the issue of share certificates. No fresh certificate should be issued unless the previous share certificates have been surrendered by the shareholders to the company.
• Issue of Duplicate Share Certificate - issue of duplicate share certificate - if a shareholder requests the company to issue the duplicate share certificate, the company may impose some reasonable terms regarding the evidence of the loss of original certificate.
• Liability in Case of Fault in Issuing he Share Certificate - in the company if any officer of the company commits any fault in issuing the share certificates, he may be charged a fee up to Rs.5000 per day for the period during which the fault continues.
• Form of Certificates - every certificate issued by a company must specify the name of shareholders, the shares for which it is issued and the amount paid up thereon.
• Stamping and Signing the Certificates - every certificate must be issued under the common seal of the company, affixed in the presence of at least two directors and the secretary of the company or their attorneys.
• Records of Share Certificate - whilst a share certificate is being issued all the relevant particulars must be entered in the register of members.

Examples of Share certificate

• The most common example of a share certificate is the certificate issued by a publically traded company. This certificate is typically printed on special paper and contains a range of information including the name of the company, the number of shares owned, and the name of the shareholder.
• Another example of a share certificate is the certificate issued by a private company. These certificates typically contain less information than those issued by public companies, but still include the name of the company, the number of shares owned, and the name of the shareholder.
• A third example of a share certificate is one issued by a mutual fund or other pooled investment vehicle. These certificates typically include the name of the fund, the number of shares owned, and the name of the shareholder. They may also contain information about the fund's investment strategy, performance, and fees.

Advantages of Share certificate

A Share Certificate provides a number of advantages such as:

• It is a legal document that serves as evidence of ownership of a certain number of shares in a company. It shows the name of the shareholder, the date of issue, the number of shares issued and their nominal value.
• It is a proof of ownership and can be used in courts of law to prove that the shareholder is the legal owner of the shares.
• It is also a useful document for tax purposes, as it is used to determine the cost of the shares for tax calculations.
• Share certificates can be used as collateral for loans, and can be transferred easily between shareholders.
• It can be used to track the performance of the company and the value of the shares over time.

Limitations of Share certificate

Share certificates are important documents for shareholders, but they do come with certain limitations. These limitations include:

• The share certificate is not legally binding and therefore does not entitle the shareholder to any legal rights or benefits.
• The share certificate does not provide any information regarding the financial performance of the company.
• The share certificate does not provide any information regarding the voting rights of the shareholder.
• The share certificate does not provide any information regarding the dividends or other distributions that may be paid out to the shareholder.
• The share certificate does not provide any information regarding the company's board of directors or management team.
• The share certificate does not provide any information regarding any other shareholders of the company.
• The share certificate does not provide any information regarding any changes to the company's articles of incorporation or other governing documents.
• The share certificate does not provide any information regarding any stock splits or other changes to the share structure of the company.
• The share certificate cannot be used as evidence in any legal proceeding.

Other approaches related to Share certificate

A Share Certificate is a document issued by a company to certify that the person named in the certificate is the owner of the shares of the company as stated in the certificate. However, there are other approaches used when it comes to ownership of shares and the transfer of such ownership such as:

• The Central Securities Depository (CSD) system which is an electronic system used to record the ownership of shares in a company and facilitate the transfer of ownership.
• Transferring of shares through a transfer deed, which is a document that legally transfers the ownership of the shares from one shareholder to another.
• The use of Stock Exchange for the buying and selling of shares.

These approaches provide shareholders with different options for the transfer of their shares in a company.

In summary, a Share Certificate is a document issued by a company to certify that the person named in the certificate is the owner of the shares of the company as stated in the certificate. However, there are a number of other approaches to the transfer of ownership of shares such as the use of a CSD system, a transfer deed, or the Stock Exchange.

Footnotes

Share certificate — recommended articles

Certificate of ownership — Allotment letter — Shareholder register — Nominee shareholder — Letter of instruction — Vesting order — Distribution statement — Mortgage deed — Limited warranty deed

References

• Dornseifer F., (2015). European Law Publisher,"Corporate Business Forms in Europe".
• Tomasic R.,Bottomley S., McQueen R. (2012). Federation Press , "Corporation Law in Australia".
• Tyagi M.,Kumar A., (2010). Atlantic Publisher & Dist , "Company Law".

Author: Patrycja Bajda