Issuing of a new Share Certificate without an actual transfer of shares

[Diksha Gupta]

During the process of issuing a share certificate during the transfer of shares, it's stated that first, the issued share certificate has to be surrendered by the former shareholder (or their certificate is cancelled by the company in case of non-surrendering). Then this certificate has to be issued in the name of the latter shareholder.

But what if the company, for fraudulent purposes, cancels the share certificate of a shareholder and without any transfer of shares, issues a new certificate in the name of another person?

So what would be done in this case?

[Poornima Gupta]

I believe that in this case, the penalty under Section 46, Companies Act, 2013 will be imposed on the company and the officers engaged in such fraud. Kindly refer to-

Section 46 - Certificate of shares - Companies Act, 2013

AI Summary

Certificate of shares: fraudulent cancellation and reissue exposes the company and officers to statutory penalties under company law.
Companies ordinarily cancel or require surrender of an existing share certificate only to reissue in the transferee's name following a valid transfer. If a company cancels a shareholder's certificate and issues a new certificate to another person without any actual transfer, the company and responsible officers may incur penalties under Section 46 of the Companies Act, 2013 for improper cancellation and reissue.