When an investor buys shares of a publicly-traded company they are issued a share certificate also known as a stock certificate. The share certificate generally serves as a receipt for the stock purchase. It includes important details about the investor’s stock ownership, primarily the number of shares they bought. In most cases, investors never receive a physical share certificate as the process is managed by the Central Securities Depository (CSD) electronically. This enables automated proxy voting, dividend distributions and other pertinent notifications for the shareholder.
In some cases, however, an investor may choose to hold the physical share certificate which details their share ownership. A share certificate can be replaced if it is lost, stolen or damaged. Regardless of whether a shareholder loses his or her stock certificate, that person still owns the shares. In order to replace the physical certificate, the shareholder will typically need to contact the company's stock transfer agent. The corporation should be able to provide the shareholder with information on how to contact the transfer agent. The best strategy is to contact the company's investor relations department.
Upon notifying the transfer agent of the loss, the agent will place what is called a ‘stop transfer’ on the certificate to prevent others from cashing it in. This is much like the stop payment that you might place on a check at your local bank. The transfer agent will also notify appropriate parties to alert them of the situation.
Each company’s procedures may vary but generally, there are some basic steps that the shareholder must follow.
First, the shareholder must describe the loss and any facts surrounding the loss in an affidavit. Second, the shareholder may be required to purchase an indemnity bond. The purpose of the bond is to protect the corporation and the agent in case the lost certificate is somehow redeemed by another party at a later date. (Think of it simply as additional insurance). Note: The cost of this bond is typically 1%-3% of the value of the shares.
When the necessary information has been provided and the steps taken a new certificate will be issued.
For further reading, see What Owning A Stock Actually Means.