Issue of Share Certificates and Payment of Stamp Duty in India (2025 Guide)

The Most Overlooked Post-Incorporation Compliance That Can Cost You Heavily Later

By Prashant Kumar

Introduction: Why This Step Matters More Than Founders Realize

Once a company is incorporated, the excitement of opening a bank account or filing Form INC-20A often overshadows one of the most crucial legal steps — the issue of share certificates and payment of stamp duty.

Under Indian company law, share certificates are the primary evidence of ownership in a private limited company. Yet, many startups delay or mishandle this process — not realizing that missing the stamp duty deadline can result in penalties up to ten times the original duty, or worse, questions over the very validity of their share capital.

I’ve seen funding rounds delayed because share certificates weren’t properly stamped. It’s one of the smallest steps — but legally, one of the biggest mistakes founders make. — Prashant Kumar

What Does the Law Require?

Every company must issue share certificates to its subscribers within 60 days of incorporation and pay stamp duty within 30 days of their issue. Both steps are mandatory under the Companies Act, 2013 and the Indian Stamp Act, 1899, and non-compliance attracts heavy penalties.

Statutory Framework

Companies Act, 2013 – Section 56(4)

Every company having share capital must deliver share certificates within 60 days from the date of incorporation or allotment.
Each certificate must:

• Be signed by two directors and the company secretary (if appointed).
• Be serially numbered and properly printed on prescribed stationery.
• Record the details of each shareholder, class of shares, and distinctive numbers.

The company must also maintain:

• Form SH-1 (Register of Share Certificates), and
• Form MGT-1 (Register of Members).

Stamp Duty Requirement

Under the Indian Stamp Act, 1899 (and relevant State Stamp Acts), stamp duty must be paid within 30 days of issue of share certificates.
The applicable rate and method of payment vary by state. For example:

• Delhi: 0.1% of the face value, paid online via SHCIL e-stamping portal.
• Maharashtra: 0.1% under the Maharashtra Stamp Act, paid via GRAS portal.
• Karnataka: 0.1% under Article 19 of the Karnataka Stamp Act.

Why This Compliance Is So Commonly Missed

In practice, incorporation consultants often stop after filing INC-20A — assuming the process is complete. But without proper share certificate issuance and stamp duty payment, the company’s capital structure remains legally incomplete.

Here’s what typically happens:

• The share certificates are printed but never stamped, or
• Founders forget to pay stamp duty within 30 days, or
• The company never updates its registers (SH-1, MGT-1).

Later, during due diligence, investors, bankers, or regulators ask for:

• Stamped share certificates,
• Proof of e-stamp payment, and
• Updated registers.

If missing, the company may have to pay penalties up to 10 times the original stamp duty, or face delays in FDI, valuation, or ROC filings.

A ₹500 stamp duty mistake can become a ₹5 lakh penalty — or worse, a credibility issue in front of investors. — Prashant Kumar

Practical Checklist for Compliance

Step 1 – Hold a Board Meeting

Within 60 days of incorporation, the Board should:

• Approve the issue of share certificates.
• Authorise directors and company secretary to sign and seal them.
• Approve the payment of stamp duty via state portal.

Step 2 – Prepare Share Certificates

• Certificates must include:
  • Name of shareholder, distinctive numbers, and folio.
  • Date of issue and company’s common seal (if any).
• Ensure SH-1 register entries match certificate numbers.

Step 3 – Pay Stamp Duty

• Determine applicable rate based on the state of incorporation.
• Pay duty within 30 days of issue (or within 30 days from incorporation for subscriber shares).
• Generate and retain the e-stamp certificate.

Step 4 – Deliver Certificates

Hand over signed and stamped certificates to shareholders, ideally against acknowledgment.

Step 5 – Update Registers

Update both MGT-1 (Members) and SH-1 (Share Certificates) registers. Keep copies safely at the registered office.

Penalties and Consequences

Even a small delay or oversight can snowball into major legal or financial complications during M&A, investor scrutiny, or compliance audits.

Professional Insight: Why Founders Should Not DIY This

While it’s tempting to handle initial filings yourself, share certificate and stamp duty compliance requires coordination between the MCA, state revenue authorities, and banks.

A Company Secretary in practice ensures that:

• The certificates are prepared and signed in accordance with Secretarial Standard-2 (SS-2).
• The stamp duty is paid on time with proper classification.
• Registers are properly maintained and digitally archived for future reference.

This one compliance proves whether your company is run by professionals or by shortcuts — and investors can tell instantly. — Prashant Kumar

Related Compliance Steps

Your share certificate compliance directly links with two earlier steps:

• Filing of Commencement of Business – Form INC-20A
  (Capital infusion must be verified before issuing certificates.)
• Appointment of First Auditor – Form ADT-1
  (The auditor verifies capital and records in the first financial audit.)
• Opening of Bank Account & Capital Infusion After Company Incorporation in India (2025 Guide)
  (Bank account opening is very first step after incorporation and share subscription money must be deposited into Company’s bank account before the issuance of share certificates.)

You can also revisit the Post-Incorporation Compliance Checklist for Indian Companies for a complete timeline of filings and board actions.

Summary: A Small Step That Defines Ownership

Issuing share certificates and paying stamp duty may look procedural — but it’s the legal foundation of your company’s ownership structure.
It confirms who truly owns the company and ensures those rights are recognized in law.

Founders who neglect this step invite future disputes. Founders who complete it build credibility. — Prashant Kumar

Getting this right once means your cap table, share registers, and investor records stay clean forever.

About the Author

Prashant Kumar is a Company Secretary, Published Author, and Partner at Pratham Legal, a full-service Indian law firm advising on corporate, regulatory, and transactional matters.

He has led compliance and governance functions for Woodland, IndoBevs, and Deesan Group, and advised GMR Group, Medanta Hospitals, Ahuja Group, Mantri Group, Isprava, and The Ashoka Hotels.

He helps businesses build credible, compliant, and sustainable governance systems, aligning legal discipline with business growth.
📧 prashant@prathamlegal.com | 📞 +91 98210 08011