What is a share certificate?

What is a share certificate?

A share certificate or Stock certificate is a document issued by a company certifying the date the certificate is issued, and that a certain person is the registered owner of shares in the company.

The key information contained in the share certificate is the name and address of the shareholder, the number of shares held, the class of shares, and the amount paid (or treated as paid) on those shares.

There is no legal requirement to provide certificates to the original shareholders who set up the business and become members during the company formation process. This is because their details are recorded in the statement of capital and memorandum of association.
Unless the terms of issue or the articles provided to the contrary, the company must issue a share certificate within two months of the issue or transfer of any shares.

Most companies will require the share certificate to be produced when a request is made to transfer shares. Duplicate certificates may be made available, but usually on receipt of a statement of the facts and an indemnity against any liability incurred by the company.
The usual practice is for a company to issue just one certificate in respect of all the shares issued or transferred at a particular time, but a shareholder may request split certificates.

Why the need for a share certificate?
Originally, share certificate may have been required to evidence entitlement to dividends, with a receipt for the payment being endorsed on the back; and the original certificate may have been required to be provided to effect the transfer of the shareholding.

Over time, these functions have been rendered redundant by statutory schemes to streamline the administrative burden on corporations and to facilitate and streamline trading on a stock exchange. For example, most jurisdictions now impose an obligation on corporations to pay dividends to shareholders registered at a relevant point of time without the need to produce the share certificate as proof of entitlement and the certificate is no longer required to be produced with a transfer of a shareholding. In some jurisdictions today, the issue of paper stock certificates may be dispensed with, at least in some circumstances, and many corporations now provide a holding statement in lieu of a share certificate for each parcel of shares owned.

Recently, most jurisdictions require corporations to maintain records of ownership or transfers of shareholdings and do not permit share certificates to be issued to bearer.