A share certificate is an essential legal document that certifies the number of shares a shareholder holds in a company. It serves as proof of ownership of the shares. However, a share certificate can sometimes be misplaced, lost, or destroyed for various reasons.
The loss of share certificate can cause considerable inconvenience to the shareholder. Let’s understand the meaning of loss of share certificate and the procedure for issue of duplicate share certificate.
Have you ever wondered precisely what is loss of share certificate? A lost share certificate simply means that the shareholder or the transferee has misplaced the original share certificate, and it cannot be located despite best efforts. Some of the common reasons for the loss of share certificate are:
- Misplacing the share certificates during the shifting of residence or office.
- Loss of share certificates kept in bank lockers due to theft, fire, floods, etc.
- Certificates can be destroyed during calamities like floods, fires, etc.
- Loss of share certificates in transit when sending them for transfer, splitting, etc.
- Not updating correspondence address resulting in returned or undelivered share certificates.
WHY SMC
- 20 Lac+ unique clients
- 33+ Years of Serving
- Advance Technical Analysis
- Free Demat Account
The loss of a share certificate can have severe repercussions for the shareholder. Some of the critical concerns due to the loss of share certificates are:
- Ownership Issues: The share certificate can make it easier for the shareholder to prove ownership of the shares. However, loss of share certificate can pose challenges during the sale of shares or while receiving dividends and bonuses.
- Fraudulent Transfers: The lost share certificate can be misused to fraudulently transfer shares by forging signatures. This can result in loss of shareholding.
- Loss of Benefits: The shareholder may lose certain shareholder privileges, such as voting rights, dividends, etc., due to the loss of shares issued in his name.
Clearly, the loss of a share certificate can hamper smooth functioning for a shareholder. It needs immediate redressal.
Issuing a duplicate share certificate in lieu of a lost or misplaced original certificate is governed by the Companies Act and SEBI guidelines. Here are the critical steps involved in the procedure for issue of duplicate share certificate:
1. Filing Police Complaint
The first step is to file a First Information Report (FIR) with the police regarding the loss of the original share certificate. The FIR should mention certificate numbers, number of shares, distinctive numbers, etc. The shareholder needs to obtain a certified copy of the FIR.
2. Submission of Indemnity
The shareholder then must submit an indemnity bond on a non-judicial stamp paper along with an affidavit to the concerned company. The indemnity bond protects the company from future claims or losses from issuing duplicate certificates. The affidavit should describe how, when, and where the certificates were lost.
3. Public Notice Inviting Objections
As per SEBI guidelines, the company has to issue a public notice in a national and regional newspaper where the registered office is situated. The notice should invite objections from the public within 15 days regarding the issuing of duplicate certificates.
4. No Objection Confirmation
If the company does not receive an objection confirmation within 21 days from the date of notice, it will confirm the same to the shareholder. If an objection is received, it communicates it to the shareholder within 7 days of the expiry of the notice period.
5. Issue of Duplicate Certificate
After the no-objection confirmation, the company can issue duplicate share certificates with the same distinctive numbers per the shareholder’s existing folio details. The words “Duplicate issued instead of lost/misplaced Certificate” will be stamped on the share certificate.
6. Payment of Prescribed Fees
The shareholder must bear the expenses associated with issuing a duplicate certificate, such as public notice charges, affidavit charges, and stamp duty fees. The company may charge an additional fee as per its Articles of Association.
WHY SMC
- 20 Lac+ unique clients
- 33+ Years of Serving
- Advance Technical Analysis
- Free Demat Account
Here are the documents required for issuing a duplicate share certificate:
- Indemnity bond agreement on a non-judicial stamp paper
- Affidavit on a non-judicial stamp paper, attested by a Notary Public/Special Executive Magistrate
- F.I.R filed with the police containing:
- Name on the share certificate
- Share certificate number
- Folio number on the share certificate
- Distinctive number of shares
- Advertisement published in a newspaper about the misplacement or loss of share certificate
- Proof of identity and residence of the shareholder
SEBI has laid down several guidelines and conditions for listed companies to issue duplicate shares. Here are some of the most essential sebi guidelines for the issue of duplicate share certificates:
- Board Approval: The issuance of duplicate shares must be approved by the company’s Board of Directors.
- Shareholders’ Approval: If the duplicate shares exceed 1% of the total shares, then shareholders’ approval may be required through a special resolution.
- Public Notice: As outlined earlier, issuing a public notice inviting objections is compulsory before issuing duplicate shares.
- Indemnity: The shareholder must furnish the company with indemnity to absorb any future losses from the duplicate issuance.
- Distinctive Numbers: The duplicate shares must carry the same distinctive numbers as per the existing share certificate held by the shareholder.
- Endorsement: The share certificate must be stamped with the words “Duplicate issued instead of lost/misplaced certificate”.
- Auditor Certificate: Listed companies must furnish a certificate from a practising company secretary to the stock exchange giving details of duplicate shares issued.
Adhering to these guidelines and conditions laid out by SEBI can help companies effectively manage and formalise the issuance of duplicate share certificates.
Conclusion
The loss of share certificate can be an unsettling event for a shareholder, but the situation can be redressed by following the proper procedure for duplicate share certificate. By understanding the meaning of a lost share certificate, the detailed step-by-step process, and SEBI guidelines, shareholders and company officials can ensure the smooth issuance of duplicate certificates.
Maintaining proper records of share certificates and safely storing them can help minimise losses. However, despite best efforts, unforeseen circumstances can lead to share certificate loss. In such cases, the shareholder can refer to the guidelines shared above.
Frequently Asked Question – FAQs
You should immediately file an FIR with the police regarding the loss. Subsequently, submit an indemnity bond and affidavit to the company to apply for a duplicate certificate.
2. What details are required in the indemnity bond?
The indemnity bond should indemnify the company from any future losses or claims that may arise from issuing duplicate certificates. It requires details like folio number, certificate number, dist. number, number and type of shares, etc.
3. Is a public notice required before issuing duplicate certificates?
Yes, as per SEBI guidelines, the company has to issue a public notice in newspapers inviting objections. The duplicate can be issued if no objection is received in 21 days.
The shareholder has to bear all the expenses, like public notice charges, affidavit fees, stamp duty, etc., for the issue of duplicate certificate.
If you find the original certificates later, you must surrender the duplicate certificates first. Only then can the original be restored in your name.
Author: All Content is verified by SMC Global Securities.
WHY SMC
- 20 Lac+ unique clients
- 33+ Years of Serving
- Advance Technical Analysis
- Free Demat Account
