Section 46: certificate of shares

Introduction

Section 46 governs how a share certificate is executed and what it proves. The 2015 amendment made the common seal optional and added a signature route for companies without one.

The section also limits when duplicate certificates may be issued, leaves the manner and form to prescribed rules notwithstanding the articles, and sets a heavy fine for issuing a duplicate with intent to defraud.

Key takeaways

Execute the certificate correctly

A certificate specifying the shares held by a person is prima facie evidence of that person’s title when it is issued under the common seal, if any, of the company, or signed by two directors, or by a director and the Company Secretary where the company has appointed a Company Secretary.

• India Code — consolidated Companies Act, 2013, section 46
• Gazette of India — Companies Act, 2013 (No. 18 of 2013) as enacted
• MCA e-book — Companies Act, 2013, current version

Handle duplicate requests

Section 46(2) allows a duplicate only if the original is proved to have been lost or destroyed, or has been defaced, mutilated or torn and is surrendered to the company. Keep the evidence of loss or the surrendered certificate with the duplicate record.

Follow the prescribed manner and form

Under section 46(3), the manner of issuing certificates and duplicates, the form of the certificate, the particulars entered in the register of members and related matters are as prescribed, notwithstanding anything in the articles. Check the current rules on the Ministry of Corporate Affairs website.

Depository holdings and fraud

For shares held in depository form, the depository record is the prima facie evidence of the beneficial owner’s interest. If a company issues a duplicate certificate with intent to defraud, it is punishable with a fine of not less than five times the face value of the shares involved, which may extend to ten times that face value or ten crore rupees, whichever is higher. Every officer in default is liable for action under section 447.

Practical preparation

Confirm the execution route; verify the holder and share particulars; for duplicates, obtain proof of loss or the surrendered certificate; follow the prescribed form and register entries; check whether the holding is in a depository.

Commencement and amendment record

Section 46 came into force on 1 April 2014 under S.O. 902(E). Section 7 of the Companies (Amendment) Act, 2015 substituted the execution words in section 46(1). Under S.O. 1440(E), that provision came into force on 29 May 2015.

• eGazette — S.O. 902(E), 26 March 2014 (commencement from 1 April 2014)
• eGazette — Companies (Amendment) Act, 2015 (No. 21 of 2015)
• eGazette — S.O. 1440(E), 29 May 2015 (commencement of the 2015 Amendment Act)

Practical checklist

Glossary

Prima facie evidence

Evidence that establishes title unless displaced by other proof.

Duplicate certificate

A replacement certificate issued under section 46(2) for one lost, destroyed, defaced, mutilated or torn.

Frequently asked questions