# Certificate of Shares — Section 46

A share certificate is the documentary evidence of a person's title to specified shares in a company.

## 1. Prima Facie Evidence of Title — Section 46(1)

### Physical Shares

A certificate specifying shares held is prima facie evidence of the title of the person to such shares, if it is issued:

(a) Under the common seal, if any, of the company; or
(b) Signed by two directors; or
(c) Signed by a director and the Company Secretary (where CS is appointed).

Important Notes:

1. Since 29-05-2015 (via Companies Amendment Act 2015), having a common seal is optional. A physical certificate signed by two directors (or one director + CS) is fully valid.

2. If Board composition permits, at least one of the two signing directors must be a person other than the Managing Director or Whole-Time Director.

3. A director's signature may be printed as a facsimile (via machine, engraving, lithography, or digital signature) — but NOT by rubber stamp. The director is personally responsible for the safe custody of the signing machine/mechanism.

### Demat Shares — Section 46(4)

Where a share is held in depository form, the record of the depository is the prima facie evidence of the interest of the beneficial owner.

## 2. Manner of Issue — Rule 5 (where shares are not in demat form)

### Pre-requisites for issue

The share certificate is issued:

On surrender of the letter of allotment or fractional coupons of requisite value
Except in cases of issues against letters of acceptance/renunciation, or bonus shares.
In pursuance of a Board resolution.

### Form

Certificate to be in Form SH-1 (or as near as possible) and must specify:
(a) Name(s) of person(s) in whose favour issued
(b) The shares to which it relates
(c) Amount paid-up thereon

### Recording

Particulars to be entered in the Register of Members (Section 88), with name(s) of holder(s) and date of issue.

## 3. Maintenance — Rule 7

Item	Rule
Blank forms	Printed only by authority of Board resolution; consecutively machine-numbered; kept in custody of Secretary or Board-authorised person.
Books/records	Preserved in good order for not less than 30 years; permanently in disputed cases.
Surrendered certificates	Defaced immediately by stamping/printing the word "cancelled"; may be destroyed after 3 years from surrender, under Board authority, in presence of a Board-appointed person.

## 4. Key Points

A share certificate is NOT a negotiable instrument.
For jointly held shares, only one certificate is issued; delivery to any one joint holder amounts to delivery to all.

Worked example

### Example 1

Example 1: Company A has not appointed a Company Secretary. Its share certificate is signed by one director only and bears the common seal. Is it valid?

Answer: No. Section 46(1) requires that the certificate be signed by two directors, OR by one director and the CS. With no CS and only one director's signature, it does not constitute prima facie evidence of title — even with the common seal.

### Example 2

Example 2: A director affixes his facsimile signature to share certificates via a rubber stamp kept with the company. Is this valid?

Answer: No. Facsimile signatures are permitted via machine, engraving, lithography, or digital signature — but not by rubber stamp.

### Example 3

Example 3: Three persons (X, Y, Z) jointly hold 100 equity shares of Z Ltd. How many share certificates are to be issued?

Answer: Only one share certificate is to be issued for jointly held shares. Delivery to any one joint holder is deemed delivery to all.

⚠️ Common exam mistakes

Believing the common seal is mandatory — it became optional w.e.f. 29-05-2015.
Allowing a rubber stamp signature — this is expressly prohibited.
Issuing separate certificates to each joint holder — only one certificate is issued for jointly held shares.
Treating share certificate as a negotiable instrument — it is NOT.
Forgetting that for depository (demat) shares, the depository's record — not the certificate — is the prima facie evidence.

Bare-Act text Section 46 · Companies Act, 2013 · click to expand

Section 46(1): A certificate, issued under the common seal, if any, of the company or signed by two directors or by a director and the Company Secretary, wherever the company has appointed a Company Secretary, specifying the shares held by any person, shall be prima facie evidence of the title of the person to such shares. Section 46(4): Where a share is held in depository form, the record of the depository is the prima facie evidence of the interest of the beneficial owner.

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Certificate of Shares (Section 46)

Worked example

⚠️ Common exam mistakes