Difference Between Share Certificate and Share Warrant

The Indian Share Market is the most sought-after destination for investors who want to invest for long-term purposes. With the advent of modern-day technology and digital tools, this avenue has seen an unprecedented scale of growth. This increase in trade also acknowledges that the company that issues shares has to keep a record of all of its shareholders, as these shareholders are also co-owners of the entity.

What Do You Mean by Share Certificate?

A Share Certificate is a legal and written document released and signed on behalf of a company that wishes to acknowledge the owners of its issuing shares. After the share certificate is released, it becomes documented proof of a shareholder's shareholding in the company.

These share certificates are released in electronic and physical formats, depending on whether the whole investing process has been transitioned digitally. When a company releases shares to the public, it provides all relevant details, such as the number of shares and the price at which they will be bought. However, it should be noted that share certificates provide only information about ownership and should not be treated as stock itself.

Meaning of Share Certificate

Let us understand the meaning of a share certificate with an example. For instance, you go to purchase a mobile phone. You paid the price of the mobile to the seller, and now you become the owner of the mobile phone. However, according to law, you require a bill that could contain details of the mobile phone that might include color, model, specification, and the last paid amount. After taking the bill from the seller, you can formally approach the company directly in the case of a malfunction or damage.

SEBI expects every company to provide a share certificate to each investor purchasing its shares. This measure ensures that both the company and relevant authorities possess accurate information regarding shareholders and their respective ownership stakes, as shares represent tangible assets with financial value, giving the shareholder partial ownership of the company.

Contents in Share Certificate

When a company issues a Share Certificate, it contains the following information about the transaction:

• Name of the company and its registration number
• Corporate Identification Number (CIN No.)
• Address of the company's registered office
• Name of the shareholder
• Folio number of shareholder
• Number of Shares bought by the shareholder
• The amount paid by the shareholder to buy the specified number of shares
• Issue date of shares
• Class of shares

Rules For Issuing Share Certificates

Share Certificates are one of the most valuable and important documents in the process of investing, therefore, a company should be meticulous in issuing share certificates to the shareholder. The companies have to observe an elongated procedure of giving share certificates. These procedures have been given below:

• Shares Allotment: At this juncture, the company decides to allot shares to appropriate shareholders. The company forms an allotment committee, which is also called a board meeting. In this meeting, key consultations take place, like the prospect of share allotment. The allotment committee constitutes a report, which is sent to the board for approval.
  After the Board's approval, a resolution is moved and passed for allocating shares to the respective applicants. Shares are allocated to the applicants, and the company secretary hands over the letter of allotment and a letter containing all the data related to the shares. Until the final certificate is issued, the letter of allotment should be considered as a Share certificate.
• Register of Members: Once the letter of allotment is given, the company secretary formulates a Register of Members from the lists of applicants received and allotment sheets. Register of Members discloses information about shareholders and details of shares allotted to them.
• Preparation of Share certificates: Another move would be to arrange the form of share certificates as recommended by the Articles of Association. After the formulation, the company secretary prints the form together and submits all the information required in the share certificate as per the application register and allotment sheets.
  Subsequently, the share certificate is endorsed by two company directors and the company secretary and accompanied by the company's revenue stamp and seal. Following the completion of all share certificates, the company convenes a board meeting to pass a resolution authorizing the issuance of the final share certificates.
• Notification and Distribution: The final stage involves notifying all shareholders regarding the completion of share certificate preparation and their availability for exchange. Shareholders are instructed to surrender their previously issued letters of allotment along with the baker's receipt. Upon surrender, shareholders are issued their share certificates, which they can retrieve from the company's registered office.

What is a Share Warrant?

A Public limited company possessing a share capital under sections of its articles and with prior permission of the Central Government can issue, under the common seal, if any, a certificate for fully paid-up shares. This certificate is called a share warrant. A share warrant also serves as proof that the bearer of the warrant is a shareholder of the company.

A share warrant, issued under the common seal of a company, if any, testifies that the bearer of the warrant is entitled to the shares specified in the warrant and provides for the payment of the future dividends on the shares specified therein.

"A share warrant is a bearer 'document of title to the shares, issued by the company under its common seal, if any, duly stamped and signed by one or more directors of the company as per its articles".

A share warrant is a negotiable instrument issued under the common seal of the company, if any. It testifies that the holder of the warrant is the owner of the shares specified therein. It does not bear the name of the shareholder; only possession of the warrant is lawful proof of the ownership of shares. Only the delivery of the warrant may transfer the shares specified in the warrant, and any bona fide holder obtains a perfect title to the shares.

Contents of Share Warrants

The contents of a Share Warrant are as under:

• Name of a company
• Address of the company's registered office
• Serial Numbers of Share Warrant
• Number of Shares
• Serial number of the Share warrant
• Value of Shares
• Date of issue of the Warrant
• Signatures of two directors or one director and secretary of the company
• The common seal of the company, if any

Procedure of Issuing Share Warrant

• Public Companies which are limited by shares are the only entities allowed to issue share warrants
• The Articles of Association should contain provision for issuing Share Warrants
• Central Government must give its nod for issuing Share Warrants
• The Share must be fully paid up.

Difference Between Share Capital and Share Warrant

Share certificate and Share warrant are two important terms widely used in the share market. Considerable differences exist between these two terms, and some of the differences are listed below:

Conclusion

Share Certificate and Share Warrant are two important terms frequently used in the share market. It is very crucial to know these terms and their differences. These terms help the investor understand the intricacies of the share market and its implications. Anyone who wants to invest in stock or the share market must know the distinction between them.