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.
Stock Certificate Sample
Here’s what a standard stock certificate looks like:
Stock Certificate No.: ____________________________ Shares of Stock: ___________________
INCORPORATED UNDER THE LAWS OF THE STATE OF ___________________
This Certificate hereby certifies that ________________________ [Stockholder] owns _________ shares of (Check one) ☐ No Par Value ☐ Common Stock in ______________________________ [Company], a ______________________ [State] corporation, transferable only on the books of the Corporation by the holder of this certificate in person, or by authorized agent, upon surrender of this certificate, properly endorsed or assigned.
This Certificate and the shares represented shall be held subject to all the provisions of the Certificate of Incorporation and the Bylaws of the Corporation and any amendments thereto, copies of which are on file at the principal office of the Corporation and made a part hereof as fully as though the provisions of said Certificate of Incorporation and Bylaws were imprinted in full on this certificate, to all of which the holder of this certificate by acceptance hereof, assents.
A statement of all of the rights, preferences, privileges and restrictions granted to or imposed upon the respective classes and/or series of shares of stock of the Company and upon the holders thereof may be obtained by any stockholder upon request and without charge, a copy of such statement.
IN WITNESS THEREOF, the Corporation has caused this certificate to be signed by its duly authorized officers President, ________________________ [President], and Secretary, ________________________ [Secretary], on ____________________, 20______.
|________________________, President||________________________, Secretary|
For value received, I, ________________________ [Seller] hereby sell, assign and transfer to ________________________ [Stockholder] _________ shares represented by this certificate, and instruct the corporate Secretary to record this transfer on the books of the Corporation. Transfer restrictions, if any, are shown below.
Dated this ______ day of _______________, 20______.
NOTICE: The signature on the assignment must correspond with the name as written upon the face of this certificate, in every particular, without alteration or enlargement, or any change whatsoever.
The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended, or any applicable state securities laws. Such shares represented by this certificate may not be transferred, sold, pledged, or assigned unless so registered, or unless an exemption from such registration is available.
The stocks referenced herein are subject to the terms and conditions of an agreement by and among the company and the stockholders of the company. The holder of this certificate may make a written request to the secretary of the corporation at the principal office of the corporation for copies of the agreement, if any, at no charge. Any person accepting any interest in such stock shall be deemed to agree to and shall become bound by all the provisions of said agreement.
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