A stockholder’s liability is limited to the amount of money they invested in the stock. They cannot be held liable for any amount past their invested capital.
Common stock and most other securities are freely transferable. That is to say that one investor may sell their shares to another investor without limitation and without requiring the approval of the issuer. The transfer of a security’s ownership, in most cases, is facilitated through a broker dealer. The transfer of ownership is executed in the secondary market on either an exchange or in the over-the-counter market. Ownership of common stock is evidenced by a stock certificate which identifies:
- The name of the issuing company
- The number of shares owned
- The name of the owner of record
- The CUSIP number
In order to transfer or sell the shares the owner must endorse the stock certificate or sign a power of substitution known as a stock or bond power. Signing the certificate or a stock or bond power makes the securities transferable into the new buyer’s name.
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