What is a Share Certificate?

A written document with a corporation’s signature that certifies ownership of the specified number of shares is called a share certificate. Another name for a share certificate is a stock certificate.

Understanding Share Certificates

Share certificates are given to investors who purchase shares from firms listed on the market. The share certificate serves as proof of the purchase and ownership of the company’s shares. The certificate attests to the registered ownership of the shares as of a specific date.

Essential details on a share certificate consist of the following:

• Number of certificates
• Name of the business and registration number
• Name and address of the shareholder
• Total number of shares held
• category of stock
• Date of Share Issue
• Amount of money paid for the shares (or considered paid)

When shares are allocated (issued) in the UK, a business is required by the Companies Act 2006 to provide a share certificate.

The corporation must provide a share certificate within two months of issuing or transferring shares. Unless a shareholder demands individual certificates, companies may issue a single certificate for all shares issued or transferred at a particular moment.

A shareholder with a stock certificate may sometimes designate another person as their proxy to vote for the relevant shares. Similarly, a shareholder without a share certificate may assign a proxy to another individual, enabling that person to vote for the shares. The corporation’s charter and corporate legislation provide voting rights.

A replacement certificate for the same number of shares may be provided in substitution of a damaged, misplaced, or stolen share certificate. Before a new document may be provided, the shareholder in this situation must return the damaged document to the business. The shareholder’s right to get one or many certificates may also be exercised now.

In the past, a share certificate was needed as evidence of dividend entitlement. The dividend payment receipt was always endorsed on the back of each certificate that was sent out. In this manner, the document was connected to all dividend payment records.

Investors in the digital age often depend on electronic evidence of ownership rather than hard-copy share certificates.

The issue of a Share Certificate Has Drawbacks

The act of issuing a share certificate has many drawbacks.

The main disadvantages, as seen by the firm, are financial and temporal. It is expensive and labor-intensive to issue paper stock certificates manually. Organizations often need a whole staff to handle the shared certificate system.

A stock certificate system requires enormously laborious clerical work to be maintained. For instance, no transaction—including a merger or spinoff—can happen unless the paper certificates are signed and sent to the business. Additionally, it becomes much harder to deal with compliance.

Furthermore, it is exceedingly challenging to maintain ownership, as shareholders may need to inform the business before transferring their certificates to another person. This results in a substantial amount of back-office labor to confirm identities before authorizing the ownership transfer. As stated differently, the corporation has to monitor the shares constantly. Typically, a computer system is used for this.

Finally, the corporation will have a lot of work to do if a shareholder’s paper certificate is lost or stolen. The company must precisely locate the old shares, confirm ownership, “stop” the paper certificates, and then issue fresh certificates. Of course, the shareholder has headaches as well from this procedure.

Recording, monitoring, and validating transactions using paper stocks is challenging.

1606

The Dutch East India Company issued the first stock certificate in 1606. It had a 150 Dutch guilder value.

Particular Points to Remember

Ordinary investors hardly ever physically take share certificates in today’s financial markets. Several nations, like Sweden, have done away with the need for share certificates as evidence of ownership and have expedited the owner registration procedure via electronic registration.

The Central Securities Depository (CSD) holds shares in the United States electronically, either in certificated or uncertificated (dematerialized) form, to facilitate ownership transfers by book entries instead of the physical transfer of certificates.

A share certificate may be issued in bearer form or registered form. A bearer share certificate, now rare, gives the possessor the power to exercise all legal rights related to the stock. In contrast, a registered share certificate serves as proof of title ownership.

Since many share certificates have a rich historical background and intricate and beautiful designs, they have become desirable, particularly the older and rarer examples. The study and collecting of share certificates and other comparable financial papers is known as “scripophily.” Like collecting stamps or banknotes, the age and quality of a share certificate determine its worth.

What are the FAQs for Share Certificates?

What’s the value of my old share certificates?

Remember to keep your previous share certificates. They could still have some value. You may take the following actions to ascertain their worth:

• To get the CUSIP number for the share certificate, contact your stockbroker.
• Determine whether the business is still traded publicly.
• Contact the transfer agent mentioned on the share certificate (the agent’s number should be on the certificate).
• To find out the history of your stock, use a premium service.

How Should I Proceed If My Original Share Certificate Is Lost?

You retain ownership of the shares and are entitled to full shareholder rights without the actual share certificate.

Ask the transfer agent for a “stop transfer” when you find your share certificate. Has it been accidentally been damaged or has it been stolen? This stops someone else from acquiring ownership of the stock certificate. You may also get assistance with this procedure from your stockbroker.

• You will be able to get a fresh certificate of replacement. However, businesses usually ask that you complete the following tasks first:
• Provide a factual account of the loss in an affidavit.
• Invest in an indemnity bond to protect the business if the misplaced certificate is discovered later.
• Get a fresh certificate before a gullible buyer does.

What is the tax if stock certificates are transferred upon death?

The tax ramifications are the same whether stock certificates or electronic shares are transferred upon death. In other words, if someone dies and leaves you with shares, you are not taxed on that amount. However, if you sell them, you could be responsible for the taxes.

Conclusion

• Companies that sell shares on the open market issue share certificates.
• A share certificate is issued to a shareholder as proof of the purchase and ownership of a certain number of the company’s shares.
• Physical share certificates are no longer often issued in today’s financial industry; digital records are used instead.
• A replacement certificate for the same number of shares may be provided in substitution of a damaged, misplaced, or stolen share certificate.
• It is expensive and labor-intensive to issue paper stock certificates manually.
• Paper stock is difficult to maintain ownership of since shareholders may need to inform the corporation to transfer their certificates to another person.
• Ask the transfer agent for a “stop transfer” when you find your share certificate accidentally damaged or stolen.
• The tax ramifications are the same whether stock certificates or electronic shares are transferred upon death.