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A Share Certificate is a certificate that evidences the holder’s title to shares.
What is a share certificate?
A share is a unit or portion of a larger allocation. It is one of the equal fractional components in which stock or the share capital of a company is divided. A share certificate is a document which serves as a receipt on behalf of a business selling shares on the stock market. It represents legal proof of shared ownership of a stated number of shares in a company from a specified date. A share certificate owner can be a person(s) or a registered entity. There is a legal time limit for issuing share certificates which must be abided by and should be verified through the company legal department or management. Most share certificates will contain all of the shares purchased on the same date on one document however, split certificates may be requested by the shareholder.
Furthermore, when there is a difference in share class even if they are owned by the same shareholder, a separate share certificate must be issued for each class of shares. In addition, a separate certificate must be issued when any new shares are purchased by an existing or new shareholder at a later date, or when a shareholder transfers or sells existing shares to another shareholder. In today’s economic environment digital records are commonplace and have replaced the outdated practice of issuing paper share certificates. In either case it is imperative to keep a secure record of each share certificate issued and to ensure it is entered in the Register of Members.
Primary Information Included on a Share Certificate
Shareholder(s) name and address-in the case of joint shareholding, only the name and address of the initial shareholder must be shown; however, it’s best to include the name of each individual shareholder. In any event, only one certificate is generally issued and forwarded to the initial subscriber, not each mutual shareholder.
- ID number of the person(s) the share certificate is issued-government issued photo id such as a driver’s license or passport.
- Full Company name and registration number– the registration number is a unique combination of numbers and sometimes letters which validates their registration as an entity.
- Address of company headquarters- a registered official address wherein documents may be delivered to the company and its executives.
- Website of company, if applicable
- Company Email address
- Certificate number or distinguished number -generally if this is the first share certificate issued by a company, then the number will start with 1 or 0001. Share certificates are unique, may not be amended and/or duplicated, and must have its own sequential number
- Quantity of shares owned-indicated in numerical form as well as written out
- Date of issue-indicates date the individual/company became the owner of the share(s)
- Nominal value of the shares- also referred to as book value, face value, or par value and is an arbitrary value assigned to a share when it is issued.
- Class or type of shares– To safeguard themselves from a takeover companies issue different classes of shares. Common stock generally provides voting rights and dividends. Preferred stock typically guarantees dividends but excludes voting rights..
- Amount paid or treated as paid for the shares
- Signature of two company executives; or
- Signature of company executive and company secretary; or
- In the case where there is only one company executive, and no company secretary, an eyewitness must be present to witness and verify the executive’s signature.
- Affixed company seal or stamp
Issuing a Share Certificate
- Share Distribution- Legally issued to a shareholder after a company has distributed shares. It reflects the numerical number of shares and the number is fully written out.
- Share transfer-A shareholder sells or gives their shares to someone else. The new shareholder may be a corporation or an individual. The initial shareholder may opt to remain on the certificate with fewer shares in which case two new share certificates are issued invalidating the original share certificate. A shareholder may also choose to relinquish their rights and altogether resulting in their share certificate being cancelled.
- Issuance of new shares– An alloted increase of new shares available to new members by the company for set period of time. This escalates the company’s share numbers without affecting existing shares therefore avoiding any stock cancellation. New share certificates are generated and the list of shareholders is updated.
- Lost certificate– The original certificate is cancelled and a replacement share certificate is issued.
Register of Members
Each shareholder is eligible to view the Register of Members which is a record of who has stock in the company and pertinent information regarding their shares. In general this register also known as a register of shareholders includes the following information:
- The name of each shareholder/member
- The contact address for each shareholder/member
- The quantity and types or classes of shares held by each shareholder
- Amount paid or agreed to be paid for each share
- Date each member became a shareholder in the company
- Date each member ceased to be a shareholder in the company, if applicable.
Alternate Names for Share Certificate
- Certificate of Stock
- Stock certificate
Key points included
- Certificate number;
- Number of shares covered by the certificate; and
- Identity (name and address) of the holder.