A stock certificate shows that someone owns shares in a company. Company officers, like the president and secretary, sign it to confirm this ownership. With this document, shareholders can view company reports, receive dividends, and attend shareholder meetings. They can also use the certificate as security for a loan if needed. Although shares are mostly issued online today, many investors still feel more secure with a paper certificate.
When Do Companies Use Stock Certificates?
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Starting a Company: When a company is first set up, its Articles of Incorporation authorize a certain amount of stock shares.
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Public Offering: During an IPO, a company sells stock certificates to raise money.
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Showing Ownership: Stock certificates prove who owns shares in the company.
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Transferring Shares: Stock certificates confirm when shares are transferred to someone else.
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Adding Shares: A company may issue more stock certificates if it needs to raise extra money.
What to Include in a Stock Certificate
A stock or share certificate contains the following essential elements:
- Stock certificate number: A unique number that identifies the stock issuance for proper recordkeeping.
- Number of shares: The number of shares issued to the stockholder.
- Company name: The name of the company that issues the stock.
- State of incorporation: The state under which the company is incorporated.
- Stockholder name: The name of the stockholder.
- Certifying statement: A statement certifying that the stockholder owns a certain number of shares in the company. The statement should clarify that the stock is only transferable on the books of the corporation by the stockholder or an authorized agent.
- Type of Stock: The classification of shares, either “No Par Value” or “Common Stock.”
- Signatures of authorized officers: Signatures from the company’s authorized officers, usually the president and secretary, to confirm the legitimacy of the stockholder’s equity ownership.
- Transfer section: Only necessary if a seller sells, assigns, or transfers the shares represented by the certificate to a stockholder.
Ways to Obtain Stock Certificates
Shareholders who want to obtain a corporate stock certificate as proof of their investment can do so through several common methods, including the following:
- Through a Brokerage Request: If you already hold shares digitally, you can contact your brokerage to request a paper certificate for these shares.
- Through the Issuing Company: Shareholders can sometimes request stock certificates directly from the issuing company, especially for companies that manage their own stock issuance. Smaller or private companies can easily refer to their company share record to issue a certificate accurately.
- Through a Transfer Agent: Transfer agents who manage company stock records can often provide share certificates upon request for shareholders who currently hold shares in book-entry form.
Stock Certificate Sample
Download a stock certificate template to record a shareholder’s ownership of company stock. Available in PDF or Word format:
Frequently Asked Questions
What Happens to the Value of a Stock Certificate If a Company Merges With Another?
The value of stock certificates after a merger depends on the merger’s terms. Sometimes, a shareholder may receive shares of the new company at a predetermined exchange ratio. In other instances, they may receive cash, a combination of cash and stock, or another form of reimbursement.
Do Stock Certificates Expire?
No, stock certificates don’t expire. As long as the company still exists, the certificate holder can prove their equity ownership with this document. If a company has gone bankrupt, the stock certificate likely won’t have any monetary value.
Can I Choose Whether to Receive a Paper Stock Certificate?
Yes, you can choose to receive a paper stock certificate if you prefer. While most investors can access and track their shares digitally through their brokerage accounts, a physical document offers tangible proof of ownership.
If you wish to receive one, you can simply request it from the company or transfer agent, and they can provide it for you. This option ensures you have a physical document to safeguard your investment and manage your portfolio as you see fit.
What Can I Do With Old Stock Certificates?
Here are some options you have when dealing with old stock certificates:
- Check Their Value: Research the issuing company’s status to determine if it has undergone mergers or acquisitions, as these events can impact the certificate’s value.
- Consult a Financial Advisor: Consult a financial advisor who can provide insight into the document’s value. If you discover it has some monetary value, you can initiate a sale or transfer it to a form of digital proof.
- Keep Them As Collectibles: A certificate from a no longer operational company may be valuable as a collectible item.
- Check for Unclaimed Property: If you misplaced an old certificate and aren’t sure of its value, check with your state’s unclaimed property division. If someone turns over a lost document to the state, you may be able to reclaim its value and any associated dividends.
