Sections 44, 45 and 46 of the Companies Act, 2013: Nature of Shares, Numbering and Share Certificates

Section 44 - Nature of shares or debentures

Meaning: Section 44 treats the shares, debentures and other interest of a member in a company as movable property. Their transfer is governed by the manner provided in the company's articles.

The provision therefore links the proprietary character of a member's interest with the company's articles. A transfer must also comply with other applicable provisions of the Companies Act, 2013 and the rules governing transfer or transmission of securities.

Section 45 - Numbering of shares

Meaning: Every share in a company having share capital must ordinarily be identified by a distinctive number. The statutory exception applies where a person's name is entered as the holder of beneficial interest in the share in the records of a depository.

Distinctive numbering identifies individual physical shares. The depository exception reflects the dematerialised system, in which beneficial ownership is evidenced through depository records rather than individual physical share certificates.

Section 46 - Certificate of shares

Section 46(1): Share certificate as evidence of title

A share certificate specifying the shares held by a person is prima facie evidence of that person's title to those shares. Under the current statutory wording, the certificate may be issued under the company's common seal, if any, or signed by two directors, or by a director and the Company Secretary where the company has appointed one.

Section 46(2): Duplicate share certificate

A duplicate certificate may be issued where the original is proved to have been lost or destroyed, or where it has been defaced, mutilated or torn and is surrendered to the company. The prescribed procedure under the applicable rules must also be followed.

Section 46(3): Prescribed manner, form and records

The manner of issuing an original or duplicate share certificate, its form, particulars to be entered in the register of members and related matters are governed by the prescribed rules notwithstanding anything contained in the company's articles.

Section 46(4): Shares held in depository form

Where a share is held in depository form, the depository's record is prima facie evidence of the beneficial owner's interest. This provision should be read with the depository framework applicable to dematerialised securities.

Section 46(5): Fraudulent duplicate certificate

If a company issues a duplicate share certificate with intent to defraud, Section 46(5) provides a substantial monetary penalty for the company, linked to the face value of the shares, and the officer in default is liable for action under Section 447 concerning fraud.