Section 45 of the Companies Act is the pillar that maintains fairness and order in any company's shareholding structure. Every share in a company with share capital shall be distinguished by a unique number to aid proper accounting and identification of the owner of the share. This is important for corporate governance and smooth transactions in shares. However, the records maintained by depositories exempt shares held in dematerialized form. This understanding of Section 45 is important for the companies and the shareholders as well as the legal practitioners, because it forms the underpinning of clarity on ownership and reinforces trust in corporate systems.

Purpose of Section 45 of the Companies Act 2013 

Section 45 is focused on establishing a clear, unique identity for every share issued by a company with share capital. This is achieved by creating a unique number that will help in the determination of the shares so as to prevent confusion of one share from another and will ensure correct records of ownership.

Provision under Section 45 of the Companies Act 2013

Section 45 of the Companies Act 2013 provides that each share issued by an enterprise that has share capital shall have a distinct number. The unique number attributed to each share identifies and distinguishes each share as an individual, thus easily tracing ownership, transfer, and any other transaction dealing with the share.

Exception to the Requirement of Distinctive Number 

The proviso or exception to Section 45 is that this section will not apply to the dematerialized or demat forms of shares.

For dematerialized shares, the depository maintains digital records rather than paper-based certificates. The depository system already has its methodologies to maintain ownership and has no requirement of distinctive numbering per share.

Thus, shares of a person whose name appears as the beneficial owner in the depository do not need serial numbering since they are available in electronic records.

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Impact on the Companies and Investors

For Companies: It is a must for companies that every physical share certificate contains a unique number unless the shares are held in demat form. The companies are required to update their procedures with this requirement.

For Shareholders: Shareholders who hold their shares in physical form will be able to use the numbers for tracking the same. Those holding demat shares will be able to track the same with the depository's records.

Illustration on Section 45 of the Companies Act 2013

ABC Ltd. issues shares to raise capital. Being a company with share capital, ABC Ltd. is required to give every one of its shares unique, distinctive numbers.

Physical Shares:

• Mr. Sharma purchases 100 shares in physical form. ABC Ltd. issues a physical share certificate to him. Each one of the 100 shares issued has a unique number ranging from 1001 to 1100. Thus, every share that Mr. Sharma owns will be unique.

• Subsequently, Mr. Sharma transmits 50 of his shares to Ms. Verma. In this connection, due to the requirement of demat, records get rectified wherein it shows that share No. 1051 to share No. 1100 are credited in the name of Ms. Verma and share Nos. 1001 to No. 1050 are held by Mr. Sharma

Dematerialized or Demat Shares:

Shares issued by ABC Ltd. are also available in demat form through a depository. Mrs. Kapoor buys 200 shares and holds those shares in her demat account. Due to the fact that these are electronic shares, they don't carry distinctive numbers issued by ABC Ltd.

The records in the depository are the proof of ownership of Mrs. Kapoor, and ABC Ltd. doesn't have to maintain unique numbers for each demat share.

Summing Up

Section 45 of the Companies Act, 2013 happens to be an important mechanism giving clarity, transparency, and some amount of order into company share management. As it has been laid down under this section that every share capital of a company be appropriately distinguished by a specific serial number, which would help to have proper identification of shares; precise tracking of ownership as such will become easy, thereby enabling smooth transactions. While dematerialized shares are exempt from this requirement due to the special record-keeping ability of depositories, the provision is quite crucial for companies holding physical share certificates. Section 45 compliance not only safeguards shareholder rights but also helps a company maintain the promise of keeping clean and orderly shareholding records, building trust and accountability in corporate governance.

Find more about the Latest Amendments in Companies Act 2013

Section 45 of the Companies Act, 2013 FAQs

1. What is the main purpose of Section 45 in the Companies Act, 2013?

Section 45 requires every share in a company with share capital to have a unique number, ensuring each share is distinct. This unique identification helps track ownership and simplifies share transfers, ensuring transparency and clarity in shareholding records.

2. Does Section 45 apply to all types of shares?

No, Section 45 does not apply to dematerialized (demat) shares held through a depository. In these cases, the depository maintains the ownership records, making unique numbering by the company unnecessary.

3. Why is distinctive numbering of shares important?

Distinctive numbering allows each share to be individually identified, preventing confusion and ensuring that ownership and transfer of shares are clearly recorded. This transparency is crucial for accurate shareholding records.

4. How does Section 45 affect shares in electronic (demat) form?

For shares held in demat form, Section 45’s distinctive numbering requirement doesn’t apply. Instead, the depository maintains records of beneficial ownership, eliminating the need for individual numbers.

5. What happens if a company fails to assign unique numbers to its shares?

Failing to assign distinctive numbers could lead to issues in tracking ownership, transferring shares, and potentially lead to compliance issues. Properly following Section 45 ensures accurate and orderly share management, benefiting both the company and its shareholders.