4.3 Share certificates

4.3 SHARE CERTIFICATES

Share certificates are physical or electronic documents issued by a company to its shareholders to evidence their ownership of shares in the company.

Purpose

Share certificates serve as proof of ownership and provide shareholders with tangible evidence of their investment in the company.

– They represent a legal title to the shares and can be used to establish ownership and transferability of shares.

Contents of share certificates

– Share certificates typically include essential information such as the name of the company, the class and type of shares held, the shareholder’s name, the number or quantity of shares, the unique share certificate number, and the date of issuance.

– The certificates may also include details about any restrictions or special rights attached to the shares, such as voting rights or dividend preferences.

Physical share certificates

– Traditionally, share certificates were physical documents printed on paper and issued to shareholders.

– Physical certificates often include security features like watermarks, holograms, or unique designs to prevent counterfeiting.

– Shareholders were required to keep their share certificates in a safe place as they were required for share transfers or exercising shareholder rights.

Electronic share certificates

– Electronic shareholding systems eliminate the need for physical share certificates. Instead, shares are held and recorded electronically in a central depository or registry.

– Shareholders receive statements or electronic records confirming their share ownership instead of physical certificates.

Transfer and transmission of share certificates

– Share certificates are transferable documents that allow shareholders to sell, gift, or transfer their shares to other individuals or entities.

– To transfer shares, the shareholder typically endorses or signs the back of the share certificate and delivers it to the buyer or the company’s registrar.

– In the case of transmission, where shares are transferred due to the death or bankruptcy of a shareholder, the appropriate legal procedures must be followed, and the share certificate may need to be accompanied by relevant documentation, such as a probate order or court order.

Replacement and cancellation

– If a physical share certificate is lost, stolen, or damaged, the shareholder should inform the company and follow the required procedures to obtain a replacement certificate.

– In the case of electronic shareholding, the shareholder may need to contact the relevant depository or registrar to request a replacement or updated statement of their shareholding.

– When shares are transferred or canceled, the share certificates are usually returned to the company for cancellation or marked as “canceled” to prevent misuse.