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Share Warrant.

Sathyanarayana.B (Senior Executive- Finance) (49 Points)

03 November 2007

Hi...i want to know about share warrants in detail. Can anyone help me in this regard? my basic questions are;

1. What is share warrant? whether it can be traded in secondary market?

2. What is the procedure of issue of share warrants and how to disclose in the financial statements.?

3. Whether its a kind of derivative?

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5 Replies

Tejpal Sheth (Practising company secretary-visiting fa) (1933 Points)
Replied 05 November 2007

share certificate is converted in share warrant. Yes it can be traded. if A/A of companay authorise, after passing resolution and obtaining permission of central government company may issue sharewarrnat. Balance sheet highlight about this matter. For eX. 1000 SHARES ARE CONVERTED IN TO 100 WARRANT OF Rs. ____ No its not kind of derivative

Rahul (Company Secretary & Manager-Legal) (216 Points)
Replied 08 March 2008

further...share warrants cant't be issued at the first instance....first shares are to be issued and then only warrants can be issued.

share warrant holder are not members of the company...so once warrants have been issued...their names are to be struck-off from the register of members. though they continue to claim dividend as before.

(Guest)

about share warrant

shyam (CA Final Student) (166 Points)
Replied 01 July 2008

Share Warrant are issued after issuing Shares. It is the document on which dividend can be had. Possession can be transferred jus by handing it over.

Joy (Advocate) (90 Points)
Replied 27 March 2010

Refer Sections 114 & 115 of Companies Act, 1956, as reproduced below:

114. ISSUE AND EFFECT OF SHARE WARRANTS TO BEARER.

(1) A public company limited by shares, if so authorised by its articles, may, with the previous approval of the Central Government, with respect to any fully paid-up shares, issue under its common seal a warrant stating that the bearer of the warrant is entitled to the shares therein specified, and may provide, by coupons or otherwise, for the payment of the future dividends on the shares specified in the warrant.

(2) The warrant aforesaid is in this Act referred to as a "share warrant".

(3) A share warrant shall entitle the bearer thereof to the shares therein specified, and the shares may be transferred by delivery of the warrant.

115. Share warrants and entries in register of members

(1) On the issue of a share warrant, the company shall strike out of its register of members the name of the member then entered therein as holding the shares specified in the warrant as if he had ceased to be a member, and shall enter in that register the following particulars, namely:-

(a) The fact of the issue of the warrant;

(b) A statement of the shares specified in the warrant, distinguishing each share by its number; and

(c) The date of the issue of the warrant.

(2) The bearer of a share warrant shall, subject to the articles of the company, be entitled, on surrendering the warrant for cancellation and paying such fee to the company as the Board of Directors may from time to time determine, to have his name entered as a member in the register of members.

(3) The company shall be responsible for any loss incurred by any person by reason of the company entering in its register of members the name of a bearer of a share warrant in respect of the shares therein specified, without the warrant being surrendered and cancelled.

(4) Until the warrant is surrendered, the particulars specified in sub-section (1) shall be deemed to be the particulars required by this Act to be entered in the register of members; and, on the surrender, the date of the surrender shall be entered in that register.

(5) Subject to the provisions of this Act, the bearer of a share warrant may, if the articles of the company so provide, be deemed to be a member of the company within the meaning of this Act, for any purposes defined in the articles.

(6) If default is made in complying with any of the requirements of this section, the company and every officer of the company who is in default, shall be punishable with fine which may extend to ¹[five hundred rupees] for every day during which the default continues.

1. Subs. by Act 53 of 2000, sec. 47, for "fifty rupees" (w.e.f. 13-12-2000).