2.3 Share Certificate

WANT TO KNOW WHAT IS A SHARE CERTIFICATE?

As earlier mentioned, a share certificate is a document issued by the company stating that the person named therein is the registered holder of a specified number of shares of a certain class and they are paid up to the amount specified in the share certificate. Share certificates must bear the common seal of the company and also must be stamped under the relevant Stamp Act. One or more directors must sign it. It should state the name as well as occupation of the holder and the number of shares, their distinctive number and the amount paid up. Before the introduction of demat accounts these certificates where transferred to every shareholder.

See a sample share certificate below: This was the physical share certificate transferred earlier. It is a lot of 100 shares at face value of Rs 10.

Now, instead of holding share certificates the shares are held by owners in the demat form. This has ushered in a major transformation in the stock market as it is more convenient for anybody to sell or buy a share. Demat account is an account wherein you can hold shares of various companies in the dematerialised (electronic) form. Now just as you have to open an account with a bank for your money transactions, in a similar way you can open a demat account if you want to buy or sell stocks. It is like a bank account where actual money is replaced by shares.

Now let us look at the face value and market value of stocks.