When an investor wishes to own part of a company, they buy shares from that organization. This data is then recorded on a legal document called a stock certificate template, proving their ownership. The Dutch East India Company issued the first such document in 1606. They were issued in physical form for the first four centuries of investing history, including in initial public offerings (IPOs).
A physical stock certificate is usually a tad bigger than regular paper, contains a seal, and comes in intricate designs specific to the issuing company. This layout discourages counterfeiting and replication. Below, we take a closer look at these documents and the purpose they serve.
What Is a Stock Certificate?
A Stock Certificate is a formal legal document that records a shareholder’s ownership of a given number of stock shares in a corporation. It acts as proof of ownership, allowing the holder to declare dividends, attend shareholder meetings, and receive annual company reports. With a physical copy, the holder can also successfully apply for a loan on the shares’ value.
Stock certificates are usually signed by the Secretary and President of a corporation and can be referred to by other names, including:
- Notice of Shareholder Ownership
- Certificate of Stock
- Physical Certificate
- Certificate of Acquisition
- Paper Stock Certificate
- Share Certificate
What Is a Stock Certificate Template?
A stock certificate template is a formatted file that contains all the elements of a shareholder certificate. It includes slots where an authorized figure can fill in the name of the shareholder, the value of stock owned, purchase date, corporate seal, and required signatures.
Stock Certificate Templates & Examples
Understanding Stock Certificates
Owning stock means that you have partial ownership of a company. Because such information is crucial to the running of a corporation, stock ownership is usually recorded on a legal certificate (electronic or physical copy). Every certificate has a design specific to the company, an identification number, date of purchase, and shareholder’s name, among other details. It will also contain a printed or handwritten signature from company executives.
Stock certificates were recorded on physical paper in the past but are now processed and stored electronically through a process called book-entry form. Rather than physically transfer shares, this new process changes accounting entries to denote exchanges. It is safer and less prone to fraud.
When Is a Stock Certificate Used?
A shareholder will receive a stock certificate as proof of their partial ownership of a corporation. This is standard practice in companies with a select group of investors and shareholders. When the company Secretary issues a shareholder with a stock certificate, they maintain meticulous records of the exchange and develop an accurate shareholders list.
In some cases, stocks are collectible items or gifts that the public can buy and keep or exchange. Good examples include the Tinker Bell decorated Disney paper certificates that are no longer available and Pixar and DreamWorks Animation SKG Inc. certificates with Shrek or Buzz Lightyear decorations. These certificates are considered collectibles.
Essential Elements of a Stock Certificate
A certificate of stock is a legal document, and a lot of attention to detail goes into preparing it. Here is what a viable copy will entail:
- Certificate registration number
- Certificate issue date
- Corporation name
- Corporation location (state name)
- Incorporated date
- Shareholder’s name
- Class of issued shares
- Number of issued shares
- Authorized signatures (usually the President and Secretary’s)
- Transfer restrictions (indicated in the fine print)
- Corporate seal – required by some states
Types of Stock Certificates
There are two types of stock certificates used in corporate companies:
- Bearer Stock Certificate – This certificate gives the bearer of the shares all the legal rights that come with the ownership. It belongs solely to the stock bearer. However, this type of certificate is tough to find today as it was used to record the transfer of offshore-originating shares.
- Registered Stock Certificate – This certificate is filed in the registration records of the issuing company. It records the total shareholders of the company and acts as proof of title.
Consequences of Not Having a Stock Certificate
A shareholder cannot prove that they bought or own shares from a given corporation without a valid Certificate of Stock. This document records the transfer of shares and allows the holder to seek financing on the value of the stock or sell their shares. If you lose your stock certificate or it is destroyed, refer to the guidelines provided by the US Securities and Exchange Commission.
When a shareholder purchase shares in a corporation, the authorizing figures use a stock certificate template to fill out the information that proves the purchase and subsequent ownership. Such details include the shareholder’s name, value and class of shares issued, and authoring signatures. Some states also require that a certificate contain a corporate seal for authentication. All this data is recorded electronically, unlike in the past when physical certificates were issued to shareholders.