There are many ways to invest. There are workplace retirement plans and the stock market. You can also opt for certificates of deposit or invest in rental property. You can also buy shares from particular companies.
A Gallup survey revealed that 61% of Americans have invested in stocks. Meanwhile, more than 10 million people in the UK have share certificates. There are some concerns that these documents will be going the way of the Dodo soon though. At least in Europe.
It doesn’t mean that share certificates will be gone forever. It will only transition to a digital platform. Share certificates have been around for centuries and will always remain relevant.
Understanding the Importance of Share Certificates
A share certificate is a legal document. It’s issued by companies to their stockholders. Its purpose is to provide proof of share ownership. The document certifies that an individual owns a certain amount of shares in the company.
The certificate contains several key details. It notes the name of the owner and the number of shares they have. But it doesn’t represent the real value of said shares.
Share certificates are crucial because it helps prove who the real shareholders are. These documents also help the company keep track of investments made to them. Businesses have to update the certificate details on a regular basis. Especially as share ownership can become very fluid.
Let’s say someone bought 300 shares. He then decided to sell 150 shares after three weeks. The same individual then bought another 200 shares two months later. Their share certificates must reflect all these transactions. The documents make auditing and reconciling shares easier and faster.
Steps to Issuing a Share Certificate
Stock certificates are not handed out like candy though. There are specific steps taken before the document is finally issued to the investor.
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Set Up a Board Meeting
This is the first step in the process. All concerned board members of the company will attend this meeting. They will discuss the fresh allotment of stocks. The board members will then appoint a committee to handle the share allotment. This group is also tasked to manage all the key details related to the share allotment.
The allotment committee will then prepare a report for the board of directors. The board must approve the report first before fresh shares are then issued to investors.
Investors will then receive a letter from the company’s secretary. This will inform them of the approval of their share subscription. The letter will also serve as a temporary shareholder certificate. This is only until they receive their formal certificates.
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Member Registration
The next step is to prepare a company register. It will contain all the information on the shareholder and the number of shares they hold. It will also detail the amount the shareholders paid for their shares.
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Printing the Share Certificates
The company secretary will then prepare the stock certificates. These will follow a format based on the company’s Articles of Association (AOA). The secretary will then fill out the document with the necessary information.
Corporate stock certificates contain the following details:
- Name of the company and its State of incorporation
- Shareholder’s full name
- Company’s corporate identification number
- Number of shares bought
The secretary will also ensure the share certificate is always signed. It needs the signature of at least two Directors. The company secretary is also compelled by law to sign the document. All share certificates must become stamped with the company’s official stamp.
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Dispatching the Certificates
The final step involves sending the share certificates to the respective investors. The company secretary will inform them that the documents were already dispatched. They can do this through a phone call or SMS. Many companies also send out official mail courtesy of the secretary. Shareholders also have the option to collect their certificates in person. They can do so in the company’s registered office.
Customized Stock Solutions at Your Fingertips
Maintaining a good relationship with shareholders is easy with Legacy Stock Transfer. We’re one of the best full-service stock transfer agencies in the country. We serve both private and publicly-traded companies. We have a team of reliable transfer agents dedicated to helping you 24/7. We can also help maintain your records and do custom stock reporting. We can also issue new certificates on your behalf. Call us at 972-612-4120. You can also send us a message at info@legacystocktransfer.com.