Overview of a Share Certificate

What is a Share Certificate?

A Share Certificate is a written document that evidences the buyer’s title for holding the respective company shares.

A Share Certificate, commonly referred to as a stock certificate, is issued by the companies that sell shares in the market.

It also serves as a receipt on behalf of a business selling shares on the stock market.

What is the importance of a Share Certificate?

A Share Certificate acts as legal proof of shareholding in a particular company. When an individual or a business bought some shares in a company, they will be provided with a receipt of that purchase commonly known as a Share Certificate. Having it in place will give you a strong legal footing and also helps to settle down the dispute in the case it arises in the future.

When is a Share Certificate issued?

Generally, a company issues this certificate if one of the following scenarios occurs.

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 certificate. A shareholder may also choose to relinquish their rights and altogether resulting in their share certificate being canceled.

Issuance of new shares: An allotted increase of new shares available to new members by the company for a set period of time. This escalates the company’s share numbers without affecting existing shares, therefore, avoiding any stock cancellation, New certificates are generated and the list of shareholders is updated.

Lost certificate: The original certificate is canceled and a replacement is issued.

What is included in 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.

Company name and registration number: A complete detail about the company issuing shares and their registration number Should be clearly written in the share certificate.

Certificate number or distinguished number: In the case of 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 their own sequential number.

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.

Quantity of shares owned: detailed information regarding the total number of shares owned by an individual or business should be clearly mentioned in a share certificate.

Date of issue: This is the date on which the shares have been issued or the individual/company became the owner of the shares.

The 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.

What happens if Share Certificates are lost?

Every Share Certificate has a unique number, which helps to identify or recognize each certificate. If you have lost your certificate you have to inform the respective company with that unique number and a new certificate will be provided to you.

Conclusion

A Share Certificate is a document that 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. The owner can be a person(s) or a registered entity and there is a legal time limit for issuing these certificates which must be abided by and should be verified through the company legal department or management.

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