Where a shareholder desires to transfer only some of the shares represented by a share certificate or desires to sell the shares to different person then the transferor is required to hand over the share certificate to be lodged along with the share transfer from the company. Where the transferor has already lodged with the company the required share certificate, along with an instrument if transfer for part of the shares, he may request the company to certify on the instrument of the transfer, that the share certificate for the shares covered by the instrument of transfer has been lodged with the company. This is called as certification.
According to section 112(3) (a) an instrument of transfer shall be deemed to be certificate, if it possess the word ‘Certificate lodged’ or the words to the same effect. Therefore, certification is the act of noting by the secretary etc. specifying that the share certificate has been lodged with the company.
When the transferor transfers only a portion of his shares, the company usually issues him tickets for the balance of shares which have not been transferred. These tickets are called “Balance Ticket”.
Section 112 provides that certification is simply a representation by a company to any person acting on the faith of it that there has been a prima facie title in the transfer.
The company will be liable for the certification only if:-
(i) The instrument of transfer is certified with the words ‘Certificate Lodged’ or words to the same effect.
(ii) An authorized person issues the certification instrument on behalf of the company.
(iii) The certificate is signed by any officer or servant of the company or any other person authorized to certify transfer on the company’s behalf.
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