Share Certificate

Share Certificate: Definition, How It Works, and Key Information

Key takeaways
* A share certificate (stock certificate) is a written document evidencing ownership of a specified number of shares in a company.
* Physical certificates have largely been replaced by electronic records; legal and tax rights are the same whether ownership is certificated or electronic.
* Lost, damaged, or stolen certificates can be replaced, typically after filing an affidavit and obtaining an indemnity bond.
* Older or ornate certificates can have collectible value (scripophily).

What is a share certificate?
A share certificate is a physical document issued by a corporation that certifies legal ownership of a specific number and class of shares as of a given date. Historically it served as the primary proof of entitlement to dividends, voting rights and transfer of ownership.

What appears on a share certificate
Typical elements printed on a certificate include:
* Certificate number
* Company name and registration number
* Shareholder name and address
* Number and class of shares
* Issue date
* Amount paid (or treated as paid)

How share certificates work
* When shares are issued or transferred, the corporation (or its transfer agent) records the ownership and may issue a certificate as proof.
* A shareholder may grant a proxy to another person to vote the shares; voting rights are defined by the company charter and corporate law.
* Certificates can be reissued if damaged, lost, or stolen; companies generally require return of a damaged certificate or proof and safeguards before issuing replacements.

Modern practice: dematerialization and book-entry systems
* Most markets now use electronic registration rather than physical certificates. In the U.S., the Depository Trust Company (DTC) holds shares and enables transfers by book entry.
* Some jurisdictions have eliminated physical certificates entirely and maintain ownership records electronically.
* Whether shares are held in certificated or dematerialized form, the legal and tax implications are effectively the same.

Disadvantages of issuing physical share certificates
From the company’s perspective, issuing paper certificates is labor-intensive and costly. Practical drawbacks include:
* High administrative and clerical burden to issue, track and verify certificates.
* Delays in corporate actions (mergers, spin-offs) when relying on physical signatures and mail.
* Difficulty keeping ownership records current because certificates can change hands without notifying the company.
* Extra work to stop transfers and reissue certificates when originals are lost or stolen.

Special considerations
* Registered vs. bearer certificates: Registered certificates name the owner on company records. Bearer certificates (now uncommon) confer rights to whoever physically holds the document and are largely phased out because of misuse risks.
* Collectibility: Many older or ornate certificates have value to collectors (scripophily). Condition, rarity and historical significance determine collectible worth.
* Historical note: The first known stock certificate dates to the early 17th century (Dutch East India Company).

If you lose a share certificate
You remain the beneficial owner even without the physical document. Typical steps to replace a lost or stolen certificate:
1. Contact the transfer agent immediately and request a “stop transfer.”
2. Provide a sworn affidavit describing the loss.
3. Obtain an indemnity bond to protect the company against future claims if the original surfaces.
4. Request issuance of a replacement certificate; a broker can often assist.

Determining the value of old certificates
If you find an old certificate, consider these steps:
* Check the certificate for identifying numbers (CUSIP) and the transfer agent.
* Verify whether the issuing company still exists or has been acquired, merged, or delisted.
* Contact the transfer agent or a broker to trace ownership and current value.
* Use specialized services or historical research for hard-to-trace issues or to assess collectible value.

Tax considerations on transferred or inherited certificates
* Tax consequences depend on what you do with the shares, not whether the holdings were certificated or electronic.
* Inherited shares generally receive a stepped-up basis at the decedent’s date of death for U.S. tax purposes; taxes may apply when you sell the shares.

Conclusion
Share certificates were once the primary proof of stock ownership but have been mostly replaced by electronic records. Physical certificates still exist and matter for replacement, historical interest, or collectible value. Whether you hold certificated or book-entry shares, legal ownership rights and tax treatment are essentially the same—keeping accurate records and contacting the transfer agent are key if issues arise.