Summary
- A share certificate is a document issued by a company as legal proof that you own a specific number and class of shares.
- It includes key details such as the shareholder’s name, number and class of shares, and date of issue.
- While the share register is the official record, the certificate acts as evidence of ownership and is important for transfers and disputes.
- This guide explains share certificates for business owners in Australia, outlining their purpose and legal requirements, prepared by LegalVision, a commercial law firm that specialises in advising clients on corporate structuring.
- It provides a practical explanation of issuing certificates, required information and their role in managing share ownership.
Tips for Businesses
Ensure share certificates match your members register and include all required details. Issue them promptly after allotting shares. Consider digital certificates for efficiency. Keep accurate records and update certificates when shares are transferred or reissued to avoid disputes or compliance issues.
A share certificate is a document issued by a company that provides legal proof of a shareholder’s ownership of a specific number and class of shares. It records key details such as the shareholder’s name, the shares held and the date of issue, and acts as evidence of their interest in the company. This article explains what a share certificate is, what it includes and why it is important.
What is a Share Certificate?
A share certificate is a document a company issues to shareholders with a signature on behalf of a corporation. It serves as legal proof of share ownership, indicating the exact number of shares held by a shareholder. A share certificate may include the following information, such as:
- unique certificate number;
- name of the company and the Australian Company Number (ACN);
- that the company is registered under the Corporations Act 2001 (Cth) (Corporations Act);
- name of the shareholder;
- address of the shareholder;
- date of issuance;
- number of shares owned (previously owned and new shares);
- serial numbers, especially if some of the shares issued in the company are not fully paid;
- class of shares owned;
- amount paid per share; and
- unpaid amount on the shares (if any).
Alternatively, a certificate is required to include:
- name of the company and the Australian Company Number (ACN);
- that the company is registered under the Corporations Act;
- class of shares owned; and
- unpaid amount on the shares (if any).
You should note that a new certificate issued containing the required information is considered evidence of the title of the new shares stated on the certificate.
Additionally, a company can issue new share certificates physically or digitally. However, it is rare for a company to issue physical share certificates because digital certificates are:
- firstly, more cost-effective because issuing new digital certificates is significantly more economical than printing and mailing physical ones to shareholders;
- secondly, more secure as they are generally more difficult to duplicate, forge, or transfer without authorisation; and
- finally, easier to transfer given that shares can be bought, sold, and transferred electronically within seconds, and thus greatly improves efficiency in share trading.
Issuing Share Certificates
Many large corporations have access to online share registries and secretary service providers to prepare, maintain, and issue electronic share certificates. However, smaller companies often do not have access to such platforms, so the company secretary is responsible for completing and issuing certificates.
Once a company prepares a share certificate, it will then issue it to the shareholder. Additionally, the company will keep a copy of the certificate with the rest of the company’s records.
Issuing to an Entity
Share certificates come after the establishment of a register of shareholders, or more commonly known as a members register, which is required for all private companies. Where the company issues shares to an entity, the company’s directors or secretary must organise for the issue of a share certificate to the shareholder within two months of the date of purchase. The company must also notify the Australian Securities and Investment Commission (ASIC) of the share issue and change to the company’s members register within 28 days. If ASIC is updated after 28 days, there are late fees payable by the company.
When transferring shares from one entity to another within one month after the lodged transfer date, the company must provide the entity receiving the share with a new share certificate. If the entity giving the shares remains a shareholder after the transfer, the company must also provide an updated share certificate.
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Importance of Share Certificates
Share certificates serve as evidence of ownership of shares. For example, when a shareholder dies, the certificate serves as evidence of ownership and allows for the transfer of shares. Hence, it is essential that all the information on the certificate is correct.
Under the Corporations Act, a company must set up and maintain an accurate and up-to-date register of shareholders, which also acts as evidence of ownership. The register of members must contain the following:
- member’s name and address;
- the date on which the entry of the member’s name in the register is made;
- the date on which every allotment of shares takes place;
- number of shares in each allotment;
- shares held by each member;
- class of shares;
- share numbers (if any), and share certificate numbers (if any), of the shares;
- the amount paid on the shares;
- whether or not the shares are fully paid;
- the amount unpaid on the shares (if any); and
- whether or not the shares are being held by a trustee of a trust.
Losing Share Certificates
Losing a share certificate can create significant difficulties, particularly in financial transactions. For example, banks often require share certificates as collateral before lending money to a company or individual shareholders. Without a physical certificate, securing such loans can become problematic.
However, if a share certificate is lost, stolen, or destroyed, the shares are not ‘lost’ per se. Instead, the company must reissue a certificate upon receipt of an application by the owner of the shares:
- within 21 days after the payment is received by the company or within such longer period as ASIC approves, if the company requires the payment of an amount not exceeding the prescribed amount; or
- if the above does not apply, within 21 days after the application is made or within such longer period as ASIC approves.
In both instances, the shareholder must write to the company and provide a statement declaring that the share certificate has been lost and not sold or disposed of.
Additionally, the shareholder will also need to declare that they have made an adequate attempt to recover the lost share certificate. The company may request that the shareholder pay an administrative fee for the reissuing of the certificate.
Further, if a lost share certificate is later recovered, the original certificate must be returned to the company. However, using digital share certificates has removed many issues related to lost share certificates.
Key Takeaways
A share certificate is an important document issued to shareholders. Share certificates act as a receipt, providing proof of ownership of shares. There is certain information that is required to be on a share certificate, although failure to include this information does not affect ownership of the shares.
If you need help issuing share certificates, our experienced Corporate lawyers can assist you as part of our LegalVision membership. LegalVision provides ongoing legal support for businesses through our fixed-fee legal membership. Our experienced contract lawyers help businesses manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 1300 544 755 or visit our membership page.
Frequently Asked Questions
A share certificate is a document that a company will issue to shareholders, along with their signature. This certificate provides proof of ownership of a number of shares. Likewise, share certificates act as a receipt, reflecting the exact number of shares a shareholder owns in a corporation, the amount they paid and the class of shares purchased.
Share certificates serve as evidence of ownership of shares. Comparing them to the purchase of property, a share certificate serves as title to the share(s). Amongst other things, share certificates outline the number of shares the shareholder owns, the class of shares owned and the date of issue of the shares. Further, when a shareholder dies, the share certificate is evidence of their ownership of shares. Likewise, it allows for the transfer of shares to the beneficiary.
A share certificate includes details such as the shareholder’s name, number and class of shares, date of issue and company details. These elements help identify ownership and share rights.
If you lose a share certificate, you can request a replacement from the company. The company may require an indemnity or evidence before issuing a new certificate.
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