Significance of Share Certificate

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The act of the company’s Board of Directors appropriating a specified number of shares from the company’s previously un-appropriated capital to persons who have submitted applications for shares is referred to as “allotment.” Allotment must be made by proper authority and within reasonable time upon application only. It should be absolute, unconditional and must be communicated. The shares of a company cannot be allotted in contravention to any law of the land.

The shares come into existence upon allotment as held in the case of Re Calcutta Stock Exchange. Share certificate is issued by the company within 2 months of allotment. A share certificate is a document issued by a company to its members that specifies the number of shares held by the member and the amount paid on each share. According to Section 45 of the Companies Act of 2013, each share of the company’s share capital must be assigned a unique number for identification purposes. However, if the shares are owned by a person whose name is listed as holder of beneficial interest in such share in the records of a depository, no such distinction is required, as per proviso to Section 45. 

A certificate under the company’s common seal, if any, or signed by two directors or a director and the company secretary, if the company has appointed a Company Secretary, is prima facie evidence of the person’s title to the shares specified therein, according to Section 46(1) of the Act. The certificate is the shareholder’s only piece of documentary evidence of possession. However, it is not a warranty of title by the company issuing it.

Issuance of Duplicate S,are Certificate

According to Section 46 (2). a duplicate certificate of shares may be produced if the original certificate:

(a) is proven to have been lost or destroyed; or 

(b) has been defaced, damaged, or torn and is surrendered to the company.

Manner of issuance of Share Certificate or Duplicate Share Certificate

According to Section 46(3), the manner of issue of a certificate of shares or a duplicate thereof, the form of such certificate, the particulars to be put in the register of members, and other items should be such as may be required, notwithstanding anything stated in the articles of a company.

Procedural for Issue of Share Certificate  

Rule 5 of the Companies (Share Capital and Debentures) Rules,2014 deals with the issue of share of certificate.

  1. For the purpose of issuing a share certificate a Board Resolution must be passed, and the corporation must get a letter of allotment or fractional coupons of the required value. In the event that the letter is lost, misplaced or destroyed, the Board has the authority to impose fair conditions. 
  2. Share Certificates are issued in Form No. SH-1, and must include the name of the person in whose favour the certificate is issued, the shares to which the certificate refers, and the amount paid-up on those shares.
  3. Every certificate must state the shares it refers to and the sum paid-up on them, and it must be signed by two directors or a director and the Company Secretary, if one has been designated by the company. If the company has a common seal, it must be affixed to the certificate in the presence of those who must sign it. 

It will suffice if the certificate is signed by a director and the CS or any other person approved by the Board for the purpose in the instance of a One Person Company. If a director’s signature is printed on the share certificate as a facsimile signature by any machine, equipment, or other mechanical methods, such as engraving in metal or lithography, or digitally signed, but not by rubber stamp, he is presumed to have signed it, 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.

  1. Details of share certificates to be entered in the Members’ Register.

Procedure Issue of Duplicate or Renewed Share Certificate

Rule 6 of the Companies (Share Capital and Debentures) Rules, 2014 deals with the issue of renewed or duplicate share certificates. 

  1. Renewal of share certificates can be done upon the surrender of old certificates. 
  2. The company may charge a fee for duplicate share certificates, up to Rs. 50 per certificate, if the board so determines.
  3. Without the prior consent of the Board, the Company will not issue any duplicate share certificates in substitution of those that have been lost or destroyed.

If the company is publicly traded, duplicate share certificates must be granted within 45 days, and if the company is not publicly traded, the certificates must be issued within three months after receipt of all required documentation.

  1. The details of each renewed and duplicate share certificate must be recorded in the Register of Renewed and Duplicate Share Certificates (Form No. SH.2).
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The register is to be kept at the company’s registered office in the custody of the company’s Company Secretary or any other person permitted by the Board.

Maintenance of Certificate Forms, books and Documents

Rule 7 of Companies(Share Capital and Debentures) Rules, 2014 deals with the maintenance of requisite certificate forms, books and documents which can be summarized as follow: 

  1. All blank forms to be used for the issuance of share certificates shall be printed, and the printing shall be done only on the authority of a Board resolution, and the blank form shall be machine-numbered sequentially, and the forms, as well as the blocks, engravings, facsimiles, and hues relating to the printing of such forms, shall be kept in the custody of the Company Secretary or such other person as the Board may designate.
  2. All books and documents relevant to the issue of share certificates, including the blank forms of share certificates referred to above, shall be maintained, preserved, and kept in safe custody by the following persons:
  1. the committee of the Board, if so authorized by the Board or where the company has a Company Secretary, the Company Secretary; or
  2. where the company has no Company Secretary, a Director specifically authorised by the Board for such purpose.

3. All books mentioned above must be kept in good condition for at least thirty years and permanently in disputed cases, and all certificates surrendered to a company must be immediately defaced by stamping or printing the word “cancelled” in bold letters and may be destroyed after three years from the date of surrender, under the  the authority of a resolution of the Board and in the presence of a person duly appointed by the Board in this behalf;

The rules indicated above do not apply to the cancellation of securities certificates under section 6 of the Depositories Act, 1996, when such certificates are cancelled in accordance with the SEBI (Depositories and Participants) Regulations, 1996.

Record of Depositary: a prima facie evidence

When a share is kept in depository form, Section 46(4) stipulates that the depository’s record is prima facie evidence of the beneficial owner’s interest.

Issue of Duplicate Share certificate to defraud

According to Section 46(5), if a company issues a duplicate certificate of shares with the intent to defraud, the company will be fined not less than five times the face value of the shares involved in the issue of the duplicate certificate, which may extend to ten times the face value of the shares involved in the issue of the duplicate certificate, or rupees ten crores, whichever is higher.

Further a person acting on the company’s share certificate may be entitled to reimbursement for the losses he has incurred. The value of the shares at the moment of the company’s refusal to recognise him as a shareholder, plus interest from that date, is the measure of damage as held in the case of  Re the Bahia and San Francisco Rly. Co.

Time of issue of certificate of securities

Under Section 56(4) of the Act, every company, unless prohibited by any provision of law or any order of any Court, Tribunal or other authority must deliver the certificates of all securities allotted, transferred or transmitted:

(a) within a period of two months from the date of incorporation, in the case of subscribers to the memorandum; 

(b) within a period of two months from the date of allotment, in the case of any allotment of any of its shares; 

(c) within a period of one month from the date of receipt by the company of the instrument of transfer or, as the case may be, of the intimation of transmission, in the case of a transfer or transmission of securities; 

(d) within a period of six months from the date of allotment in the case of any allotment of debenture. 

However, if the securities are dealt with through a depository, the company must immediately notify the depository of the specifics of the allotment of the securities. 

Implications of Share Certificates

A certificate of shares is proof that the allottee owns a specific number of shares in the company, as well as their nominal and paid-up values and unique numbers. This certificate is prima facie evidence of possession of the shares held by shareholders.

Furthermore, when a company issues a certificate, it guarantees that the information included inside is accurate. Any person acting on the basis of the company’s share certificate can force the company to pay compensation for any losses incurred as a result of any mistake in the share certificate as any representations made in the certificate bind the company.

The Madras High Court in the case of Ghanshyam Chhaturbhuj v. Industrial Ceramics (Pvt.) Ltd., observed that the share certificate is the only documentary proof of title, and it is a declaration by the company that the individual whose name is on the certificate is a shareholder in the company. Further, a company cannot dispute the amount mentioned in the share certificate as already paid. 

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Split Certificate

A separate certificate claimed by a shareholder for a portion of his interest is referred to as a split certificate. The benefits of a split certificate include the ability to multiply the certificates into as many shares as the shareholder owns in the event of a transfer by means of sale or mortgage in small lots.

Purpose and Form of Share Certificate

A share certificate allows a company member to trade his shares in the market, whether for sale, mortgage, or pledge, by demonstrating a good prima facie marketable title to the shares. A share certificate is a document that proves the shareholder’s title of the shares in his or her possession. It’s the first prima facie evidence of his ownership of the shares.

Share Certificate as Official Publication

The Department of Company Affairs (now the Ministry of Corporate Affairs) considered whether a share certificate constituted an official publication within the meaning of Section 12(3)(c), and the Department clarified as follows in Circular No. 3/73[8/10(47)]/72-CL-V dated 3.2.1973:

“It will be seen that in terms of Section 82 ( which Corresponds to section 44 of the Companies Act, 2013), the shares in a company are movable property transferable in the manner provided in the articles of the company. Section 84 (which Corresponds to section 46 of the Companies Act, 2013) provides that a certificate under the common seal of the company specifying any share held by any member shall be prima facie evidence of the title of the member to such share.” 

With the Companies (Amendment) Act, 2015 coming into force the common seal is no more mandatory. The implications and signatories have been discussed earlier. Thus, shares are movable property transferable in the manner provided in the articles of the company and that the share certificates are certificates of title and are movable property but are not publications in the nature of prospectus, balance sheet, profit and loss account, notice or advertisement. As a result, the conclusion reached is that the share certificate is not an official publication under Section 12(3)(c) of the Companies Act, 2013.

Legal Effect of Share Certificate 

A share certificate is prima facie evidence of the person’s title whose name is on it. It means that the share certificate is a declaration by the company that the person named on it was the lawful owner of the shares specified in it at the time it was issued, and that those shares were paid-up to the extent stated. It isn’t the same as having a title; it’s just proof of it. It is, nevertheless, a significant statement since it is made with the understanding that other people may act on it in the belief that it is true, and this fact brings the law of estoppel into action. As a result, when a company issues a share certificate, it binds it in two ways:

(a) by estoppel as to title: Once issued, a share certificate binds the company in two ways. First and foremost, it is a declaration by the company to the rest of the world that the individual whose name is on the certificate and to whom it is delivered is a shareholder in the company. In other words, the company is prohibited from denying his ownership of the shares.

(b) by estoppel as to payment: If the certificate says that the full price has been paid on each of the shares, the company is barred from claiming that the shares are not completely paid against a bona fide purchaser of the shares. If a person understands that the statements in a certificate are false, he cannot sue the company on the basis of estoppel.

Regardless, a certificate must be issued by someone who has the authority to do so. In addition, a certificate does not establish an equitable interest in shares. 

Personation of Shareholders

According to Section 57 of the Companies Act of 2013, any person who deceptively personates as an owner of any security or interest in a company, or of any share warrant or coupon issued in pursuance of this Act, and 

(i) obtains or attempts to obtain any such security or interest, or 

(ii) receives or attempts to receive any money due to any such owner.

He shall be punishable with imprisonment for a term which shall not be less than 1 year but which may extend to 3 years and with fine which shall not be less than 1 lakh rupees but which may extend to 5 lakh rupees.


From the above discussion it can be established that a Share Certificate is not just a mere piece of paper but an essential document which is the only proof of evidence as to the title of the shares held by an individual. Even though it is not an official publication, it allows the owner to estopp the company as to payment and title.