Division 10 of Part VI of the Companies Act 1997 gives shareholders documentary evidence of what they hold.
Section 75(1) — what must be sent, and when
(a) a share certificate signed under the common seal of the company stating — (i) the name of the company; (ii) the class of shares held; and (iii) the number of shares held; and
(b) a statement setting out — (i) the rights, privileges, conditions, and limitations, including restrictions on transfer, attaching to the shares; and (ii) the relationship of those shares to other classes of shares.
The obligation is not merely to issue a certificate. A statement of rights must go with it — setting out voting rights, dividend and capital entitlements, redemption terms, transfer restrictions, and how the class ranks against other classes.
This matters because there is no par value and no single document a buyer can read. The section 75(1)(b) statement, the share register entry under section 67(1)(a) recording transfer restrictions and where they may be inspected, and the constitution together tell a shareholder what they actually own. Note too that under section 43(3)(b) terms of issue are deemed to form part of the constitution.
Failure to comply with subsection (1) is an offence by the company (penalty under section 413(1)) and every director (section 414(1)). One month runs from the issue or from the registration of the transfer — not from receipt of the transfer form.
Section 75(2) — no certificate, no registration
Notwithstanding section 65, where a share certificate has been issued, a transfer of the shares to which it relates shall not be registered unless the form of transfer is accompanied by the share certificate, or by evidence as to its loss or destruction and, where required, an indemnity in a form required by the board.
This is a mandatory bar on registration, expressed to override section 65. It protects against a holder transferring shares twice, or transferring shares that have been deposited as security. A company that registers a transfer without the certificate exposes itself to a section 71 rectification and compensation claim.
Where shares are to be transferred and the certificate is sent in to enable registration, the certificate shall be cancelled and no further certificate issued except at the request of the transferee.
Subsection (1) requires a certificate to be sent within one month of registering a transfer; subsection (3) says no further certificate need be issued except at the transferee’s request. The safe practice is simply to issue the new certificate as a matter of course — the offence in subsection (4) attaches to non-compliance with subsection (1), and a transferee who asked for nothing is unlikely to have waived it in writing.
Section 76 — lost or destroyed certificates
Where a share certificate is lost or destroyed, the company shall, on payment of a reasonable fee, issue a duplicate to the holder on that person’s application.
(a) a statutory declaration that the certificate — (i) has been lost or destroyed; (ii) has not been pledged, sold, or otherwise disposed of; and (iii) if lost, that proper searches have been made; and
(b) a written undertaking that if the holder finds or receives the certificate they will return it to the company.
A share certificate is commonly deposited with a lender as security. Paragraph (a)(ii) — that the certificate has not been pledged, sold, or otherwise disposed of — is the company’s protection against issuing a duplicate to someone who has in fact handed the original to a financier.
The declaration is a statutory declaration, so a false one carries the ordinary consequences under the general law, and may also engage section 420 of this Act, which deals with false statements.
Note that the obligation in subsection (1) is expressed as “shall… issue”. Where the declaration and undertaking are provided and the fee paid, the company must issue the duplicate; it has no discretion to refuse. The board’s protection is the power under section 75(2) to require an indemnity before registering a transfer supported by evidence of loss.
Practical points
| Situation | What to do |
|---|---|
| New issue | Seal and send the certificate and the statement of rights within one month of the register entry |
| Transfer | Require the old certificate with the transfer form; cancel it; issue a new one within one month |
| Partial transfer | Cancel the old certificate and issue new certificates to both transferor and transferee for their respective balances |
| Lost certificate | Statutory declaration plus written undertaking, then issue a duplicate on payment of a reasonable fee |
| Shares given as security | Deliver the certificate to the lender with a signed blank transfer, and register the interest under the Personal Property Security Act 2011 — the register itself will show no trust or charge under section 72 |
| Change of company name | Certificates state the company’s name, so reissue after a change of name |
| Listed or depository holdings | Check for an exemption under section 77, which may exempt a company or transaction from Divisions 8, 9 and 10 |
Under section 69, it is the entry in the share register that is prima facie evidence of legal title, and under section 40(2) a share is transferred by that entry. The certificate records the position; it does not create it. Where the two conflict, the register governs — subject to rectification under section 71.
Sources
- Companies Act 1997 — ss 40, 43, 65, 67, 69, 71, 72, 75–77, 413, 414, 420
- Personal Property Security Act 2011
Before relying on anything here, read the current text of the Companies Act 1997 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.