Share Warrant is a document which is issued by a Public Listed Company (PLC) under its common seal, stating that the bearer of this document is entitled to the shares or stock as specified in the warrant. Without registration, share warrant can be transferred to another person.
Share warrant is a negotiable instrument and mere delivery the transfers the ownership of the shares. In the document (Share warrant), the name of the shareholders is not mentioned, and the coupon rate is attached to the warrant and the date of dividend payment will be mentioned.
The holder of the share warrant can take a share certificate if the holder surrenders the share warrant and pays the required fees for the issue of share certificates. The company will cancel the warrant and issue a new share certificate after completing required formalities and will enter the name in the register of members.
The general rule is that the holder of the share warrant is not the member of the company, but the articles of association can insert the relevant clause and can make it valid.
Conditions for issuing Share Warrant:
The following conditions need to be fulfilled for issuing share warrants:
- Only a Public company can issue share warrants.
- Authorization of Articles of Association is obligatory.
- The shares must be fully paid-up.
- Government Approval is mandatory.
Advantages of Share Warrant:
- Share mentioned in the share warrant can be transferred by share warrant exchange.
- The bank accepts share warrant as a security of the loans.
- Future dividends can be provided by attaching dividend coupons with the share warrants.
Disadvantages/Limitations of Share Warrant:
Besides advantages share warrant has some limitations which are enumerated as below:
- Bearer is not the member of the company
- The Bearer will be considered as the owner of the warrant, but sometimes it can be lost by the real owner.
- The Company may not be careful in case of printing and keeping the warrant safe.
- The stamp duty to be affixed
- Prior approval of the Government is needed
- Number of shares is mentioned in the warrant, is not sufficient for directorship.