Generally, share certificates are issued at the time of incorporation of the company and even at a later stage. Every company has its own format of issuing share certificate to their shareholders. This blog will give you descriptive view about the issuing of share certificates – Meaning, what should be included, signing authority, legal time limit and about other rules.
- What is share certificate?
- Who will issue share certificate?
- What is the legal time limit for issuing share certificate?
- Are there any other rules for issuing share certificate?
What is Share certificate?
Share certificate is a document produced and issued by a company to a shareholder on a certain date to certify that person as a registered share owner of the company. As per companies act 2006, share certificate is considered as prima facie evidence (except in Scotland) for member’s shares ownership in the company. Many businesses are adopting the new method and issuing share certificates electronically but still there are companies that are attached to the old method of paper share certificate.
Share certificates may be issued by a company but it is mandatory for a company to enter this information in the register of members to provide legal confirmation of share ownership in the company. It is necessary to make updation to register of members in order to ensure that two are consistent.
What information is included in a share certificate?
Every company has a prescribed format for issuing share certificate either in paper form or electronically. The key details usually included in a share certificate are as follows –
- Company’s name and its registration number
- Registered official address of the company
- Unique share certificate number
- Name of the shareholder
- Contact details of the shareholder
- Number of shares issued to the shareholder
- Type or class of shares
Generally, a good share certificate contains all the above details and issued electronically as per the template specified by the company.
Who will issue share certificate?
Share certificate is issued by the following persons –
- Signed by two company directors, or
- Signed by one director and company secretary, or
- Signed by the company director in the presence of the witness (in case company has a single director and no company secretary) who confirms the same with the Signature
Each share certificate contains a date on which it is issued to the shareholder. You must stamp share certificate with the company seal (In case you are having the one in the presence of combination of officers as mentioned above)
Also See: Changing of class of shares
What is the legal time limit for issuing share certificate?
In order to issue a share certificate, there is a legal time limit specified in each company’s articles of association: -
- Company share certificates must be issued by the company to the shareholders within 2 months after the initial company registration as decided in the first board meeting.
- It is a duty of the company to issue share certificates within 2 months of allotment of shares to the shareholders. Same time limit has been applied for transferring of shares too.
Note - There is no need for you to send share certificate copy to Companies house as it is issued to the shareholder directly.
Are there any other rules for issuing share certificate?
Everything is specified in your company’s articles of association. Therefore, it is important for you to check your articles of association for any special requirements (if mentioned) before issuing share certificates. Generally, a single share certificate allotted to a shareholder for all the number of shares at a specific time, which is also followed as a good business practise by the businesses. Sometimes, shareholders can even ask for split share certificates. It is mainly asked when the company issue shares for more than one class. A separate share certificate will be issued for every class, even though hold by a same shareholder.
In case of mutual shareholding, it’s good, if a company should include all the shareholder names to the share certificate and only the address of the initial named holder will be shown. In addition to it, only a single share-holder certificate containing all the shareholders names will be issued in case of joint shareholding to the initial named subscriber rather than forwarding it to every mutual shareholder separately.
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Also See: Tax advantaged employee share schemes