November 11, 2025
5 mins read
You might not think about how ownership changes every time you buy or sell shares when you trade online. A share certificate was a physical proof of ownership that companies used to give investors.
The shares you see in your demat account now are digital records. But before demat accounts, that single paper certificate was the only proof that you owned a piece of the company.
Ever wondered how individuals established ownership of a portion of a company prior to the digital revolution? They used a share certificate.
Think of it as the official, printed deed to your shares. This physical document, issued by the company, had your name on it and stated exactly how many shares you owned. For a long time, this was the main way to verify you were a shareholder.
These weren't just simple pieces of paper, either. To prevent fraud, they were often elaborately designed. Each certificate was made official with the company's seal and the signature of a director, making it a secure record of your ownership.
Companies even had different certificates for different kinds of shares, so the one for a common share looked different from one for a preferred share.
For a share certificate to be official, it needs to have a few important pieces of information:
Company Information: The full legal name of the business, its Corporate Identification Number (CIN), and the address of its registered office.
Shareholder Information: Your name, address, and a unique folio number that the company uses to keep track of you.
Share Details: It identifies the type of the shares (e.g., equity or preference), the total number of shares which are held under the certificate and the unique numbers of the share under the certificate.
Face Value: The certificate states the face value of the shares per share, which is the nominal value (value allocated by the company) at its inception.
Certificate Number: A certificate bears a serial number in order to enable its tracking and identification.
Date of Issue: The exact day you got the certificate.
Share certificates are mainly meant to serve as evidence of ownership of stocks in a firm. They assist the company to be able to find the real shareholders without any difficulty when compared to investors who purport to be shareholders.
For shareholders, the certificate is your ticket to claiming benefits. You can use it as evidence to claim any unpaid dividends or other perks the company owes you.
A company usually gives out share certificates in these situations:
When it sells new shares to investors through an Initial Public Offering (IPO), a Follow-On Public Offering (FPO), a rights issue, or a private placement.
If a company changes the way its shares are structured, such as by splitting them up, or if shares are sold to a new owner, it will issue new certificates.
If you lose or damage your certificate, you can ask the company for a new one.
A company hands out share certificates in a few key situations. The most common time is when they're raising money, like during an Initial Public Offering (IPO), where they sell shares to the public for the first time.
They also issue them for other events, such as:
Offering new shares to existing shareholders (a rights issue).
Selling shares privately to a select group of investors.
Making big changes to their stock, like a stock split or when shares are transferred to a new owner.
Replacing a certificate that's been lost or damaged.
The process for issuing a share certificate is regulated and follows a clear path to make sure everything is official.
1. Board Approval
First things first, the company's board of directors has to approve it. They typically set up a special committee to figure out which investors qualify for the shares. Once that committee drafts its report, the board gives the final green light.
2. Creating the Member Register
With the board's approval, the company secretary creates a "Register of Members". This is the official master list that holds all the details of the new shareholders, including their names, addresses, and how many shares they've been allotted.
3. Printing and Signing
Next, the actual share certificates are printed. To make them legitimate, each one must be signed by an authorised director and stamped with the company's official seal.
4. Sending Them Out
Finally, the signed and sealed certificates are mailed to the shareholders at their registered addresses. The company will usually send an email or a text to give them a heads-up that it's on the way.
Evidence of Ownership: A share certificate will be the first legal paper that will be taken as tangible evidence of a shareholder holding ownership in an organisation.
Several As Collateral: It can be provided as collateral for borrowing funds from the financial institutions since it is a physical property.
Makes the process of transferring shares easier: The physical certificate makes it easier to transfer shares between two individuals using a transfer deed.
Right to Benefits: This provides a right to the shareholder to enjoy the dividends, bonuses, and other benefits that the company gives out.
Risk of Loss or Damage: It is easy to lose, steal, or damage physical certificates, and this makes the issue of issuing a duplicate of a certificate a complex and costly process.
Slow Transfers: Transferring physical shares is a slow process, and it takes weeks to accomplish, and it is also full of paperwork.
Storage Problems: Storing paperwork may be inconvenient to the investors, and they will need to use safe deposit boxes or other places that are secure.
Vulnerable to Forgery: Physical certificates are vulnerable to forgery and fraudulent acts due to security factors, which are more prone to electronic records.
Additional Read: What is Sweat Equity?
Companies that don't follow the rules for issuing share certificates could be fined at least ₹25,000 and up to ₹50,00,000. Each officer who doesn't follow the rules could also be fined at least ₹10,000 and up to ₹10,00,000.
If you have purchased shares of a company and have received share certificates in the physical format, ensure that you dematerialise your shares right away. The Securities and Exchange Board of India (SEBI) has made it mandatory for every shareholder to convert their existing physical shares into electronic format.
To do this, you will need a demat account, which you can open with Bajaj Broking. To open your demat account today and hold your share certificates electronically, all you have to do is follow these three simple steps.
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They act as proof of ownership and help companies track shareholders for dividend or rights-issue purposes.
Upon fresh allotment, transfer of shares, share capital change (split/bonus) or when certificate is lost/damaged.
Physical issuing has largely stopped; most shares are now held electronically or in demat form.
In India, typically within two months of allotment and within one month of transfer of shares.
You can request a duplicate certificate after following the company’s process, submitting an affidavit or FIR if required.
Yes. Ownership must be transferred and dematerialised if required before sale in the modern stock market.
No. It shows number and class of shares but not their current market value.
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