5 Things You Should Know About Stock Certificates

14th Jun 2022

5 Things You Should Know About Stock Certificates

Did you know that the Dutch East India Company issued the first stock certificates in 1606? They were usually printed on paper that was bigger than average. It also contained intricate designs to prevent fraud and counterfeiting. This was a significant problem before the advent of the internet.

For the first 400-plus years of investing history, participating in an initial public offering (IPO) or buying stock often came with one of these physical stock certificates.

Until relatively recently, these documents were as much a work of art as a legal record. Their intricate designs and embossing served to reduce counterfeiting and fraud.

Today, most companies record stock securities via electronic processes. Yet, you still have options to obtain paper versions. Keep reading to learn more about stock certificates.

1. Do You Need Physical Stock Certificates?

In 2013, Walt Disney Company issued one of the last paper stock certificates. Their stocks had become collector's items.

The Burbank-based company's physical certificates included pictures of cartoon characters These documents included popular figures such as Mickey Mouse, Bambi, and Donald Duck. Many shareholders were disappointed with this modernization change.

When you buy stocks, there’s usually no physical exchange of securities. Businesses no longer have a requirement to issue paper stock certificates.

All purchases or sales are digitally registered by brokerage firms or issuing companies. This creates a safe, cost-effective, and efficient process for stock management.

As a stockholder, you may request a hardcopy stock certificate if you wish.

2. Information Required on Stock Certificate

All stock certificates must meet the Model Business Corporation Act (MBCA) guidelines. This act ensures uniformity of corporate affairs across different states.

To meet MBCA specifications, stock certificates must include the following information.

  • Name of the Corporation
  • A corporate seal of authenticity
  • Date of purchase
  • Number of shares you own
  • Relevant signatures
  • Registered stock certificate number

This serves as confirmation that you’re a shareholder in a company. Certificates must include a section to complete when you transfer share ownership. The stock certificate must also have a signature that authenticates the document.

3. Are Stock Certificate Templates Valid

Some corporations create stock certificate templates that you can download. As long as the document meets the MBCA guidelines, it's valid. There are several steps a business must take when providing these templates.

The corporation must adhere to each state’s stock certificate rules. They must conduct a meeting to authorize the issuance of stock certificates. During this meeting, the business is also required to adopt bylaws.

Last, they must declare specific information when registering with the state. For example, they’re required to clearly state the max limit of shares they’ll issue.

The template lists the company's name and state of incorporation as well as some other details. Any customization must adhere to the MBCA standards. You can buy these templates from online companies.

You’ll download the template and simply fill in the requested information. For example, the stock issue date, name of the stockholder, and the number and type of shares issued.

Then two corporate officers, usually including the president, must sign the certificate. When completing the stock certificate, it’s key to understand MBCA terminology.

4. Does Shareholder Ownership Expire?

As long as a company is still operational, stock certificates don’t expire. If the business is no longer in operation, the stock value depends on what happened.

When corporations merge, you need to speak with the new organization. Ask if they will honor your certificate and give it value. Unfortunately, if the business went bankrupt, your stock probably won’t have any value.

5. What to Do If You Lose Your Stock Certificate

If your stock certificate gets lost or stolen, don’t panic. Many publicly traded companies digitally register stock sales with the Central Securities Depository. Today, you don’t have to physically hold your certificate to own and receive stock dividends.

Yet, stolen certificates contain data about you and your company shares. Skilled thieves can transfer your shares to themselves. Thus, it's important to notify the Stock Transfer Agent with your investment company.

This agent will immediately issue a “stop transfer” order on your shares to protect them. They’ll also notify other relevant parties of the loss so they can take precautions.

To replace your paperwork, you must submit an affidavit with all facts pertinent to the loss. Make sure to write down all the details and double-check this information. This ensures there aren’t mistakes in the affidavit.

Next, you’ll need to get an indemnity bond. This protects the company and the transfer agent if shares get transferred before they can act. Now you may ask the company for a new stock certificate.

It’s vital to keep important documents, including stock certificates, in fireproof safes. This reduces your chances of loss or theft.

Looking for the Best Downloadable Stock Certificate Company?

Check out Exhibit Indexes for the best stock certificate options. We offer the downloadable stock certificates you’re looking for. Enter data in the fillable sections to personalize them with your details.

We offer customizable templates without limits on how many you can print. Always show your attorney the document you created to ensure all standards are met.

You’ll also find legal tabs, number dividers, blank tabs, will supplies, and exhibit tabs and labels. Get a quick quote and free shipping on all stock certificates.

Peruse our products page today to find what you’re looking for.