Share Certificate

What is a 'Share Certificate'

A share certificate is a written document signed on behalf of a corporation, and serves as legal proof of ownership of the number of shares indicated.

"Scripophily" is a term that signifies the collecting of share certificates and other forms of paper based financial securities.

A share certificate is also referred to as a stock certificate.

BREAKING DOWN 'Share Certificate'

When companies issue shares in the market, shareholders that purchase the shares are issued a share certificate. The share certificate basically acts as a receipt for purchase and ownership of shares in the company. The document certifies registered ownership of shares from a particular date. Similar to stamp collecting or bank note collecting, a share certificate's value is dependent on its condition and age.

Key information included in a share certificate include:

  • Certificate number
  • Company name and registration number
  • Shareholder name and address
  • Number of shares owned
  • Class of shares
  • Issue date of shares
  • Amount paid (or treated as paid) on the shares

In the UK, The Companies Act 2006 directs that a company must issue a share certificate when any shares are allotted (issued). The company must issue a share certificate within two months of the issue or transfer of any shares. Companies may issue just one certificate in respect of all the shares issued or transferred at a particular time, except a shareholder requests for separate certificates. So, a shareholder will receive one share certificate for all shares of each class held by him or her. In addition, if more than one person owns a share, only one certificate will be issued.

Sometimes a shareholder with a stock certificate can give a proxy to another person to allow them to vote the shares in question. Similarly, a shareholder without a share certificate may often give a proxy to another person to allow them to vote the shares in question. Voting rights are defined by the corporation's charter and corporate law.

A share certificate that is damaged, lost, or stolen can be reissued with a replacement certificate in respect of the same number of shares. The shareholder in such a case, must return the damaged document to the company before s/he can be given a replacement. At this time, the shareholder may also exercise the right to be issued with a single certificate or separate certificates.

Historically, share certificates were required for proof of entitlement to dividends. Each time a certificate was presented, the receipt for the payment of dividends was endorsed on the back. This way, all records of dividend payments was attached to the document.

Today in modern financial markets, individual investors rarely take physical possession of their share certificates. In fact, some countries, such as Sweden, have completely abolished the issue of share certificates as proof of share ownership in a company. Electronic registration has streamlined the process of registering owners, thereby, replacing paper certificates. In the United States, the Central Securities Depository (CSD) is responsible for electronically holding shares, either in certificated or uncertificated (dematerialized) form, so that ownership can be easily transferred through a book entry rather than the transfer of physical certificates.

A share certificate can be in either registered form or bearer form. A registered share certificate is only evidence of title ownership, while a bearer share certificate, now uncommon, entitles the holder to exercise all legal rights associated with the stock.