Folio number is one of the number a common shareholder of a company concerns. In this era of dematerialisation folio may not of much concern for a seasoned investor but it certainly have value for shareholders and entrepreneur having medium small and micro sector companies. Every shareholder found this number at his share certificate and read it distinctive numbers of shares. A folio number once allocated never changes until a person remains a shareholder in the company.
The folio number also puzzle young companies secretaries how to allocate a folio number to a shareholder. This post briefly touches the subject.
For an investor, folio number is his identity to the company but the Companies Act, 2013 does not have a single word on this subject. Even in subordinate legislation, only three rules have mention of “folio number” and two other rules refer to “folio”.
What is a folio number? It is a number of a folio. In general parlance, folio number is called page number. English dictionaries define “folio” as an individual leaf of paper or parchment, either loose as one of a series or forming part of a bound volume, which is numbered on the recto or front side only.
A folio number is a number of the page of the shareholder’s register on which details of a shareholder is recorded.
Naturally, this number is not anyway related to and affected by the number of the director but decided by the number of shareholders.
The process of allocating folio numbers is the same in all case whether it is a public company or a private company, limited or unlimited, public sector or private sector.
The allocation of folio number is an unceremonious task silently happening at the time of incorporation. Yes, indeed.
We used to allocate initial folio numbers in the same sequence in which a subscriber to the memorandum of association (MOA) signed or subscribed to take initial share capital at the time of incorporation. These subscribers are a promoter or founder shareholders of the company they are incorporating. An efficient company secretary shall prepare members’ or shareholders’ register immediately after obtaining incorporation certificate for a company. It helps him to prepare and issue share certificates to shareholders.
On the issue of further shares, new shareholders receive next folio numbers in the sequence in which they are listed on the resolution allotting shares to them.
First, two promoter shareholders A and B as a subscriber to the memorandum of association will normally get folio numbers 1 and 2.
If in a further allotment say C, D, A, E, F, and G applied for newly issued and allotted further shares then C, D, E, F and G will get subsequent folio numbers 3, 4, 5, 6 and 7. While the fact of further allotment of shares to A shall be recorded on his original folio number only which, in the present example, is 1.
Now, in the case in the further allotment, A and D applied for shares jointly in first application and D and A applied for shares jointly in the second application, they will get new and separate folio number as joint folio numbers say 8 and 9 irrespective of the fact that A and D already has individual folio. Joint holding of A and D is also different from Joint holding of D and A.
Similarly, B and his joint family firm B (HUF) are different persons and will get different folio numbers. However, B and his sole proprietorship firm B and Co. is not a different person and share shall be allotted to B only to his own folio number.
In simple terms, a legal person will get one folio number as an individual. An informal association of individuals as joint shareholding shall also get a different folio number.
REFERENCE OF FOLIO OR FOLIO NUMBER IN COMPANIES RULES
Every shareholders’ register maintained shall include an index of the names entered in the respective registers and the index shall, in respect of each folio, contain sufficient indication to enable the entries relating to that folio in the register to be readily found. [Rule 6 of the Companies (Share Capital and debentures) Rules, 2014]
Other rules having reference to folio or folio numbers are:
- Voting Through Electronic Means [Rule 20 of the Companies (Share Capital and debentures) Rules, 2014];
- The manner in which the Chairman of Meeting Shall Get the Poll Process Scrutinised and Report Thereon [Rule 21 of of the Companies (Share Capital and debentures) Rules, 2014];
- Procedure to be Followed for Conducting Business Through Postal Ballot [Rule 22 of the Companies (Share Capital and debentures) Rules, 2014]; and
- Small Shareholders’ Director [Rule 7 of the Companies (Appointment and Qualifications of Directors) Rules, 2014 ]
FOLIO NUMBER ON SHARE CERTIFICATES
Every certificate of share or shares shall be in Form SH-1 or as near thereto as possible and shall specify the name(s) of the person(s) in whose favour the certificate is issued, the shares to which it relates and the amount paid-up thereon.
ASSESSMENT OF VOTING POWER
A folio contains details of all shares registered in the name of the shareholder. It records all shares allotted, purchased and sold by the shareholder. At the end of the folio, the final figure of shares held by the shareholder shows the voting power of the shareholder mentioned on the folio.