A share certificate is a vital legal document that is given by a company to its shareholders as evidence of ownership in a specific number of shares of the company. According to Indian company law, it is prima facie evidence of title of the shares specified therein. The form, issue process, and legal necessities of a share certificate are regulated by the Companies Act, 2013 and connected rules.
The blog gives an exhaustive description of what a share certificate must include, its prescribed format, and requirements for compliance.
Introduction
When an individual or organization invests in a company by buying its shares, the company is required to provide evidence of that ownership. That evidence is in the form of a share certificate. Although nowadays most shareholding is computerized, especially in listed companies, share certificates are still vital in private limited companies and closely held companies where physical or demat records of ownership are still relevant.
Under the Companies Act, 2013, issue and design of share certificates have specific requirements. Any error or delay in their issue can result in penalties and judicial issues. So whether you are the founder of a company, director, or an officer of compliance, knowledge of the proper format and particulars of a share certificate is essential.
What is a Share Certificate?
A share certificate is a company document that it gives to its shareholders, informing them that the person or entity listed on the certificate is the registered owner of a certain number of shares. It is prima facie evidence of ownership unless otherwise proved.
This certificate is significant in a private limited company because the shares are not publicly traded, and records of ownership are kept within. The certificate is the shareholder’s formal entitlement to equity in the company and can be utilized in legal, financial, and investment proceedings.
Legal Requirements for Share Certificates in India
The Companies Act, 2013 and the Companies (Share Capital and Debentures) Rules, 2014 specify specific provisions regarding the issue of share certificates.
Some of the most important requirements are-
- A share certificate has to be issued within two months from the allotment date.
- The certificate has to be signed by two directors or by a director and the company secretary, if any.
- It should be stamped with the company’s common seal, if any.
- A company is required to keep a register of members, and the information on the share certificate shall be consistent with it.
Failure to do so can incur monetary penalties upon the company and its officers.
Standard Format of Share Certificate
The format of a share certificate must reflect professionalism, legality, and compliance with regulatory norms. It should be printed on official company stationery or letterhead, and it must contain all statutory information.
[Company Letterhead or Printed Certificate Format]
SHARE CERTIFICATE
(Under Section 46 of the Companies Act, 2013 and Rule 5 of the Companies (Share Capital & Debenture) Rules, 2014)
Certificate No: _______
Folio No: _______
ISIN (if applicable): _______
This is to certify that [Name of the Shareholder], residing at [Full Address], is the registered holder of [Number in words and figures] fully paid-up equity shares of Rs [Face Value] each, bearing distinctive numbers from _______ to _______ inclusive, in the [Name of the Company], a company incorporated under the Companies Act, 2013 and having its registered office at [Company Address].
The above-mentioned shares are held by the shareholder subject to the Memorandum and Articles of Association of the Company and carry all rights as provided under the law and internal regulations of the Company.
This certificate is issued pursuant to the resolution passed by the Board of Directors at their meeting held on [Date of Board Meeting].
The certificate has been duly signed by the authorised officials of the Company and, where applicable, the Common Seal of the Company has been affixed in accordance with the Companies Act, 2013.
IN WITNESS WHEREOF, this certificate is issued under the authority of the Board of Directors.
Dated this ___ day of [Month], [Year].
Director
(Signature)
[Name of Director]
DIN: ________
Director
(Signature)
[Name of Director]
DIN: ________
Company Secretary / Authorised Signatory
(Signature)
[Name]
Membership No: ________
Affixed with Common Seal (if applicable)
Conclusion
A share certificate may appear like a plain sheet of paper, but its value in law is considerable. It is an official recognition of title and needs to be issued responsibly, fully conforming to the Companies Act. In private companies, particularly new or closely held businesses, correct issue of share certificates is of paramount importance to transparency, trust by investors, and legal safety.
Knowing the proper format and elements required helps keep your company compliant and free of unnecessary legal issues. Issuing your first certificate or reviewing your records, clarity and precision always pay off.
Related Services
References
The Companies (Share Capital and Debentures) Rules, 2014
