A Stock Certificate is a legal document that proves and records ownership of a certain number of shares of stock in a corporation. A stock certificate serves as evidence that a stockholder owns shares of stock. With proof of ownership, the shareholder may receive annual reports, declare dividends, and receive invitations to shareholder meetings. Additionally, holding a physical copy of the certificate may make it easier to get a loan on the value of the shares.
The stock certificate should be signed by the authorized officers of the corporation, usually the President and the Secretary. Also, make sure that you read the company’s articles of incorporation to understand the rules regarding your stock certificate.
As a reference, people often call a Stock Certificate by other names:
- Certificate of Stock
- Certificate of Acquisition
- Notice of Shareholder Ownership
- Physical Certificate
- Paper Stock Certificate
- Share Certificate
What Happens If I Do Not Have a Stock Certificate?
Without a Certificate of Stock, the shareholder does not have proof of purchase or ownership. The U.S. Securities and Exchange Commission provides guidance on what to do if your securities certificate is lost, accidentally destroyed, or stolen. A Certificate of Stock serves as a record that you owned the shares and allows you to sell your stock quickly if needed.
More companies are moving away from paper certificates to electronic ownership (i.e. e-certificates) using the book entry form provided by the Direct Registration System (DRS). In some cases, brokers will charge $100-$500 for a physical certificate.
When Is a Stock Certificate Used?
A Certificate of Stock is often provided to shareholders as proof of ownership, especially in closely held corporations with only a small group of shareholders or investors. The Secretary of the corporation should record all shares issued and maintain an accurate list of all shareholders.
Some stocks are purchased as a gift or collectible item. Although Disney paper certificates decorated with Tinker Bell are no longer available, an authentic registered Certificate of Stock for Pixar and DreamWorks Animation SKG Inc. still feature characters like Buzz Lightyear and Shrek, according to USA Today.
If you found some dusty paper certificates in the attic, check out this Wall Street Journal article to determine whether you can cash out on the Certificate of Stock.
What Should Be Included in a Stock Certificate?
A stock certificate will contain the following basic elements:
- Name of the Corporation
- State of Incorporation
- Date Incorporated
- Number and Class of Shares Issued
- Registered Number of Certificate
- Name of Shareholder
- Date Certificate Issued
- Authorized Signatures
- Corporate Seal
Here are some other useful details a Certificate of Stock might include:
- Corporate Seal: some states require a seal to validate certificates
- Transfer Restrictions: check the corporate filing documents for fine print
Consider the following when creating your own corporate stock certificate:
- Who is receiving the stock certificate
- What is the registration number of the stock
- When the stock was issued
- Where the company was incorporated
- How many shares of stock and their value
For more information, the U.S. Securities and Exchange Commission describes your choices as an individual investor when it comes to owning stocks.