What is a Stock Certificate?
Stock certificate is the legal document which is considered to be evidence of ownership of the shares in the company and it consists of shareholder’s information including the name of the holder, issuing date, total number of shares issued to the holder, separate identification number accompanied by the corporate seal and signature.
In simple words, Stock Certificate is a legal document which authenticates ownership of a company by owning several shares together. Usually, the records of such ownership are kept in an electronic version in the broker’s server, but upon request, a paper format version of the same can be attained.
Stock Certificate Template
Stock Certificate Template consists of the following:-
#1 – Names and Dates – It includes the name of the company whose stocks are being represented for ownership. Next, it contains the person’s name that has purchased the said number of stocks, verifying the reliability of such information. The date also holds an essential relevance of the day upon which one becomes the owner of such stock.
#2 – Certificate Number – Each certificate has its unique coding of the number, which is issued by the company to make it more convenient for tracking in case any issue or problem arises.
#3 – Number of shares – It also contains the number of shares one holds of the company.
#4 – Signature and Seals – There is the mandatory signature of the company authority who represents the company. Also, to authenticate the sign, company authority makes seal stamping.
- #1 – It serves as evidence that the person who owns the certificate that is a part of the ownership of the business enterprise. Since the certificate holds the vital information about the owner of the stock and the number of shares he holds of the company, it is the tangible proof that can be represented if asked.
- #2 – It can be used for legal purposes as well in case there arises any sort of legal disputes. If one ever gets in some kind of conflict regarding the ownership of the same, stock certification can come handy to put a stop to such disputes as solid proof.
How is the Stock Certificate Issued?
The process of issuing a stock certificate is as follows;
- For every company, there is a Company Transfer Agent who handles in management and maintenance of shareholder documents. It is entirely a different department from the company that issues the certificate in the name of the buyer of the shares.
- Transfer agents are always listed in the company’s annual reportAnnual ReportAn annual report is a document that a corporation publishes for its internal and external stakeholders to describe the company's performance, financial information, and disclosures related to its operations. Over time, these reports have become legal and regulatory requirements..
- A broker must be contacted from the brokerage firm holding the said stock for direct registration.
- The online purchase of stocks normally holds the name of the brokerage firm unofficially.
- Such purchase means that the broker and the brokerage firm keep track of the same.
- For the paper certificate, the registration must be moved from the indirect form to the direct registration directly under the company’s name.
- Direct registration normally and automatically lists the stock certificate with the assistance of the appropriate transfer agent.
- Once the transfer agent has access to them, the certificate can be used.
Example of Stock Certificate
In a brokerage firm says XYZ Ltd Co, a broker has two investors that are Suresh and Ramesh. Suresh, being a more knowledgeable and educated guy who daily indulges in learning about the market trend and an in-depth analysis of every company’s performance. He normally likes to purchase shares in bundles from different companies, normally the blue-chip companiesBlue-chip CompaniesBlue-chip stocks refer to the stock of large stable companies having market capitalization in billions that provide a good return on stocks, may provide dividends, have less risk and are considered to be safe investments. Examples of such stocks include Coca-Cola ltd, IBM Corp, Boeing Co., PepsiCo, General Electric (GE), Intel, Visa, Wal-Mart, IBM Corp, Apple, Walt Disney, Mc Donald’s, Goldman Sachs, Johnson & Johnson, etc.. Whereas Ramesh, a very much new entrant in the investment field, is still learning about the various kind of investments that he can make in order to expand his personal wealth. He, as per expert guidance, invested only in one of the company’s shares and bought around ten of them under his name.
- Now, when they have to obtain physical or electronic evidence of their ownership, there will be two types of certificates that the transfer agent company is going to issue, respectively, to Suresh and Ramesh.
- Apart from keeping them in the electronic mode in the broker’s records, the physical certificate that they will issue will be of two types—one, the stock certificate for Suresh and a share certificate for Ramesh.
- Why such a difference? It is because Suresh is not purchasing shares only of one company; his investments are with various other companies while Ramesh deals with only one company for now. Hence, the transfer agent needs to be extra careful and also check in with the record of the broker handling to see what kind of certificate needs to be issued.
This has been a guide to what is Stock Certificate. Here we discuss the stock certificate template and advantages of owning it along with practical examples. You may learn more about our articles below on financing –