In the early days of running or investing in a company, share certificates feel almost ceremonial. Once issued, they’re tucked away and forgotten. But legally, they carry serious weight. Section 46 of the Companies Act, 2013 gives share certificates their authority by treating them as prima facie evidence of ownership.
This section doesn’t just confirm who owns shares; it also lays down how certificates must be issued, what details they must contain, and what happens when one goes missing or gets damaged. In today’s mix of physical and electronic shareholding, Section 46 bridges old practices with modern depository systems. Understanding it isn’t optional—it’s essential.
What Is Section 46 of the Companies Act, 2013 Really About?
At its core, Section 46 deals with share certificates.
The law clearly states that:
- A share certificate issued by a company is prima facie evidence of a person’s title to those shares
- The company must issue certificates in the prescribed form and manner
- Provisions exist for issuing duplicate share certificates
- For shares held electronically, the depository record is the proof of ownership
In simple words, Section 46 answers one key question: “How do you legally prove that you own shares in a company?”
Share Certificate as Prima Facie Evidence of Title
This phrase sounds legal-heavy, but the idea is simple.
A certificate of shares is prima facie evidence of title. That means:
- If your name appears on the share certificate, the law assumes you are the rightful owner
- The burden of proof shifts to anyone who challenges that ownership
In real-life terms, during audits, funding rounds, or shareholder disputes, this document can save hours of explanations and legal back-and-forth.
What Must a Share Certificate Contain?
Section 46 doesn’t allow vague documentation.
Every certificate shall specify:
- The shares to which it relates
- The amount paid-up thereon
- The name of the shareholder
- Distinctive numbers of shares
- The company’s seal (if applicable)
- Signatures of authorized directors/company secretary
Missing details can weaken its evidentiary value and may even attract penalties.
Issuance of Share Certificates: Legal Timelines
Though detailed timelines come from associated rules, Section 46 anchors the obligation.
Typically:
- Certificates must be issued within 2 months of allotment
- For transfers, certificates must be issued within 1 month from the date of execution
Delays aren’t minor technical slips—they’re statutory non-compliance.
From experience, investors often treat delayed certificates as a red flag during legal due diligence.
Duplicate Share Certificates: When Originals Are Lost or Damaged
This is where Section 46 becomes very practical.
If the original certificate is:
- Lost
- Destroyed
- Defaced or torn
The company may issue a duplicate share certificate, but only after following prescribed safeguards.
These generally include:
- Written application from the shareholder
- Indemnity bond
- Newspaper advertisement (in some cases)
- Board approval
The strict process exists to prevent fraud or multiple claims over the same shares.
Shares Held in Electronic Form: What Changes?
Modern shareholding has shifted dramatically.
For shares held electronically:
- No physical share certificate is issued
- The record of the depository (NSDL/CDSL) serves as proof of ownership
Section 46 smartly accounts for this transition, clearly stating that depository records stand at par with physical certificates.
This distinction is vital for startups and listed companies operating in a demat-heavy environment.
Legal Consequences of Non-Compliance
Section 46 is not toothless.
If a company:
- Issues false certificates
- Issues duplicate certificates with fraudulent intent
- Fails to follow prescribed procedures
Then:
- The company can be fined
- Officers in default can face penalties and even imprisonment in serious cases
In one advisory case I handled, a casual duplicate issue almost escalated into a criminal complaint—simply because procedures weren’t documented properly.
Why Section 46 Matters in Real Life
Section 46 quietly impacts:
- Fundraising rounds
- Shareholder exits
- Company valuation
- Mergers and acquisitions
- Internal disputes
A clean, compliant share certificate trail builds instant credibility. A messy one raises uncomfortable questions.
Best Practices for Companies and Shareholders
To stay compliant:
- Maintain a Share Certificate Register
- Digitally scan and archive issued certificates
- Record every duplicate issuance carefully
- Match certificates with Register of Members
- Transition to demat where possible
Compliance here is less about law—and more about long-term trust.
Common Misconceptions Around Share Certificates
Let’s bust a few myths:
- ❌ “Email confirmation proves ownership” – No
- ❌ “Ledger entry is enough” – Not legally
- ✅ Proper certificate or depository record is essential
Understanding this early prevents expensive corrections later.
Conclusion
Section 46 of the Companies Act, 2013 may look procedural, but it forms the legal backbone of share ownership. It deals with share certificates, establishes them as prima facie evidence of a person’s title, prescribes what every certificate must contain—including the shares it relates to and the amount paid-up thereon—and provides safeguards for issuing duplicates. For electronic shareholding, depository records serve as conclusive ownership proof.
In corporate law, clarity on ownership isn’t optional—it’s foundational.
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