DEFINE SHARE WARRANT. Distinction between a Share Certificate and a Share Warrant
DEFINE SHARE WARRANT
Meaning: A share warrant is a bearer document of title to shares and can be issued only by public limited companies and that to against fully paid up shares only. A share warrant cannot be issued by a private company, because the share warrant states that its bearer is entitled to a number of shares mentioned there in. It is a negotiable document and is easily transferable by mere delivery to another person. The holder of the share warrant is entitled to receive dividend as decided by the company. A share warrant is accompanied by attached coupons for the payment of future dividends. There are three parts of a share warrant: (1) The counter foil. (2) Share Warrant proper. (3) The dividend coupons. Conditions for the issue of a share warrant: (1) Only public limited companies: Share warrant can be issued by the public limited companies. It cannot be issued by private companies. (2) Against share certificate of fully paid up shares: A share warrant is only issued against share certificate of fully paid up shares. (3) Provision in the Articles: There must be a provision in the Articles of Association regarding the issue of share warrant. If there is a provision, the company can issue a share warrant. If there is no provision in the Articles, the company cannot issue a share warrant. (4) Permission of the Central Government: Prior permission from the Central Government is necessary for the issue of share warrant. (5) Share warrant not issued originally: Share warrant are not issued originally at the time of initial issue. (6) AT the request of the share holder: A share warrant is issued at the request of the Shareholders / member and not by the company at its own initiative.
Distinction between a Share Certificate and a Share Warrant
The following are some of the differences between Share Certificate and Share Warrant.
1. A share certificate is to be issued both by public and private companies. But share warrants can be issued only by public companies.
2. A share certificate can be issued both for fully paid up and partly paid up shares. But a share warrant can be issued only in respect of fully paid up shares.
3. A share certificate can be issued without the prior approval of the Central Government. But a share warrant can be issued only with the approval of the Central Government.
4. The holder of a share certificate is a registered member of the company. But the holder of a share warrant cannot be a member of the company [unless the articles permit].
5. A share certificate ‘is not a negotiable instrument. But a share warrant is a negotiable instrument.
6. Nominal stamp duty is required for issuing a share certificate. But heavy stamp duty is required for the issue of a share warrant.
7. The name of the holder of share certificate appears in the share certificate and in the Register of Members. But the name of the person who holds the share warrant does not appear either in the warrant or in the Register of Members.
8. A share certificate can be transferred by a transfer deed. The transfer is to be registered with the company. A share warrant, on the other hand, can be transferred by mere delivery.
9. The number of shares mentioned in the share certificate constitute the share qualification for directorship. But share warrant does not constitute the share qualification for directorship.
10. The holders of share certificates can apply to the National Company Law Tribunal for the winding up of the company. But the holders of a share warrant cannot file a petition to the National Company Law Tribunal for the winding up of the company.
11. No dividend coupons are attached with the share certificates. But in case of share warrants, dividend coupons are attached and the bearer of the coupons can get the dividend.
12. Stamp duty is payable for transferring the shares mentioned in a share certificate. But no stamp duty is payable for the transfer of a share warrant.
13. The holder of a share warrant is not qualified as a director of the company (where qualification shares are prescribed) but the holder of share certificate is so qualified.
14. Since a share warrant is a negotiable instrument, previous permission of the Reserve Bank of India is also required for issuing share warrants. But it is not required for share certificates.
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