In order to prevent frauds connected with the issue of share certificates, Government has issued under Section 84(4) ‘The Companies (Issue of Share Certificate), Rules, 1960. These rules provide that:
(i) A share certificate can be issued only under the authority of a resolution of the Board of Directors.
(ii) Every certificate shall specify the name(s) of person(s) in whose favour the certificate is issued, the shares to which it relates and the amount paid up thereon.
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(iii) Every share certificate must bear the seal of the company and it must be signed by at least two directors and secretary and one of the two directors must be a person other than the Managing Director or the whole-time director.
(iv) Particulars of all share certificates issued shall be recorded in the Register of Members.
(v) Share certificates must be printed under the authority of the resolution of the Board. All blocks and other equipment connected with their printing should be kept in the custody of an authorised person. Managing Director or some other director is held responsible for the safe custody of all books and documents relating to the issue of shares.
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(vi) When a new share certificate is issued for a share certificate which has been lost, the words ‘duplicate issued in lieu of share certificate number’ must be recorded both on the new certificate as well as its counterfoil.
Duplicate copy:
A share certificate may be renewed or duplicate of a certificate may be issued if such certificate:
(a) Is proved to have been lost or destroyed, or
(b) Having been defaced or mutilated or torn is surrendered to the company.
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If a company with intent to defraud renews a certificate or issues a duplicate thereof, the company shall be punishable with fine which may extend to Rs. 100,000. Besides that, every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to 6 months, or with fine which may extend to Rs. 100,000, or with both.