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What is a Stock Certificate?
A stock certificate is a legal document that verifies an investor’s ownership of common stock shares, a type of security. A stock certificate is usually a physical paper record that identifies the investor as the owner of the shares and the number of shares owned. It also contains the issuer’s name, signature, and official company seal.
This web page also defines stock certificates.
How Do You Get a Stock Certificate?
It can be challenging to obtain a physical stock certificate directly from the company. An effort to eliminate waste means that most brokers don’t offer a physical stock certificate or charge high fees for one and rely solely on digital records. However, it is not impossible, so you will want to inquire with your stockbroker or the issuing company.
Stock certificates typically feature an intricate design that may change over time to prevent replication, a corporate seal, and multiple signatures. They usually prove entitlement to dividend payments, with a payment receipt attached to the back. However, stock ownership is typically recorded electronically using a depositary securities system in modern times.
While some investors may request paper or electronic certificates on occasion, the vast majority accept or even prefer uncertificated shares. Access to equity management software has also made it easier for businesses to issue and administer uncertificated shares. When a corporation gives uncertificated shares, no paper or electronic certificate is delivered to the stockholder.
Instead, the issuer tracks share issuances and transfers in an electronic stock register. However, some industry practices state that an uncertified stock issuing corporation should provide investors access to a ledger for equity monitoring. A corporation can manually maintain its stock ledger using a simple shared spreadsheet. Corporations with many stockholders or a complex equity structure will need to find another solution.
5 Parts of a Stock Certificate
Most stock certificates come in electronic format, while some companies offer physical, embossed paper stock certificates. A stock certificate is a unique piece of paper that certifies your ownership of a company. Although they are considered an archaic method, some traders purchase the physical stock certificates as collector’s items.
Stock certificates include all of the information necessary to identify the stock and its owners, including:
Part 1. Certificate Number
A stock certificate’s face typically contains a series of numbers. The issuing company assigns each certificate a unique number for accounting and tracking purposes.
Part 2. CUSIP Number
A separate tracking number known as a Committee on Uniform Securities Identification Procedures (CUSIP) number is a unique identifier assigned to stocks and convertible debts, such as SAFE Notes and Convertible Notes, in the United States and Canada.
They contain nine alphanumeric characters and were first introduced in 1964 for greater oversight and accountability standards. If you are dealing in investment contracts, you should also note the CUSIP number to assure compliance.
Part 3. Share Count
The stock certificate should also indicate the number of shares purchased to reflect the stock’s value. Some certificates even list the share price at which the stock was purchased.
Part 4. Name and Issuance Date
A stock certificate lists a series of names, including the buyer and seller. In addition, the certificate should include your name, certifying that you are the stock’s owner. Finally, the certificate will be dated to reflect the date you acquired ownership of the shares.
Part 5. Signature and Company Seal
While some stock certificates are plain, others are highly decorative, with artwork representing their branding. The majority of certificates are signed by a company representative and the individual responsible for their registration. They may also include an authenticity seal.
Today, most businesses only issue stock certificates upon request. Still, you could request a copy directly from the company or through a lawyer. In addition, the company may have a transfer agent responsible for managing the company’s stocks as well. However, you should be able to obtain an electronic copy of your stock certificates in case you need to print them out for verification purposes.
Who Issues Stock Certificates?
Corporations no longer issue stock certificates. Instead, numerous companies encourage investors to surrender their stock certificates for newer forms. However, suppose you’re a business owner wanting to issue physical certificates. In that case, you can work with securities lawyers to create the documents you need while avoiding legal errors entirely.
Image via Pexels by Burak Kebapci
Is a Stock Certificate Worth Anything?
A stock certificate’s worth equals the number of ownership shares reflected by the current stock price, provided they haven’t been sold. You should avoid discarding physical stock certificates as they could also be physically worth something as a collector’s item, especially from well-known, nostalgic brands. A little research can assist you in determining the value of your old paper stock certificate, if any.
Here are eight steps that you can take to determine if your stock certificate is still worth something:
- Conduct a Preliminary Search. Determine if the issuing company still trades publicly on the stock mark. You can accomplish this by searching major financial websites. If the stock has been split over the years, the value listed may differ from your certificate.
- Get In Touch With the Transfer Agent. Contact the transfer agent for the stock certificate, the person who is responsible for maintaining records for stockholders. The agent should be identified on the certificate. You can then search for this individual or company online to learn more about the stock certificates.
- Contact the State. If the transfer agent does not exist, contact the state agency that handles incorporations in which the corporation was legally formed. You could also try researching the state in which the business is headquartered.
- Conduct an Exhaustive Search. If none of the preceding steps work, search the company’s history. A few excellent resources include Capital Changes, Moody’s Manual of Industrial and Miscellaneous Securities, and the U.S. Library of Congress. In addition, there are volumes of information available, which could take some time to review.
- Reach Out to Investor Relations. If a search of the new company’s history reveals that it merged with or was acquired by another company, contact its investor relations department. They could offer you the relevant information and details you need to determine your stock certificate’s value.
- Perform a CUSIP Number Search. If the previous steps yield no results, contact a startup lawyer to conduct a CUSIP number search on the stock printed on the back. This information associated with this number should tell you about the issuer.
- Hire a Securities Law Attorney. If the previous steps yield no results, use a securities law attorney to research your stock’s history. They can also offer you additional legal resources to get to the bottom of your stock’s value.
- Appraise the Stock Certificate’s Collectible Value. Determine the value of your certificate if it has lost its value as viable security. A stock’s value can be determined by who signed it, its historical significance, or the engraving. This value can be determined by contacting dealers, conducting library research, or online listings.
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Ralph graduated from University of Florida with his JD as well as an LLM in Comparative Law. He has a Master's in Law from Warsaw University , Poland (summa cum laude) and holds a diploma in English and European Law from Cambridge Board of Continuous Education. Ralph concentrates on business entity formation, both for profit and non profit and was trained in legal drafting. In his practice he primarily assists small to medium sized startups and writes tailor made contracts as he runs one of Florida disability non profits at the same time. T l Licensed. in Florida Massachusetts and Washington DC this attorney speaks Polish.
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