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When a person acquires shares in a company, they will receive a share certificate. Share certificates serve as legal proof of ownership, outlining specific information about the purchaser and their shares in the company. To help you better understand share certificates, this article will take you through what a share certificate is, how they are issued and their importance.

What is a Share Certificate?

A share certificate is a document a company issues to shareholders with a signature on behalf of a corporation. This certificate serves as proof of share ownership

Share certificates act as a receipt, reflecting the exact number of shares a shareholder owns in a corporation.

Additionally, a company can issue share certificates physically or digitally. However, it is rare for a company to issue physical copies of share certificates due to the administrative burden of issuing and maintaining them. 

Likewise, a share certification includes certain key information, such as the:

  • unique certificate number;
  • name of the company and the Australian Company Number (ACN);
  • name of the shareholder;
  • address of the shareholder;
  • date of issuance;
  • number of shares owned;
  • class of shares owned; and
  • cost paid for the shares.

Further, if a shareholder still owes any money when the company issues the certificate, the certificate will specify this as well.

Issuing Share Certificates

Many large corporations will use online share registries to issue digital share certificates. Fortunately, these platforms can issue digital share certificates almost instantaneously. However, smaller companies will often not have access to such platforms. Instead, the company secretary or director will be responsible for completing and issuing them. 

Once a company prepares a share certificate, they will issue it to the shareholder. The company will also need to keep a copy of the certificate with the rest of the company’s records.

Importantly, it is a legal requirement for a company to issue share certificates to the shareholder within two months of the date of purchase. Additionally, the company must notify the Australian Securities and Investment Commission (ASIC) of the purchase within 28 days.

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Importance of Share Certificates 

Share certificates serve as evidence of ownership of shares. If you compare them to the purchase of a property, a certificate serves as the certificate of title. Do not overlook the importance of share certificates. Hence, it is essential that all the information on the certificate is correct.

Further, when a shareholder dies, the share certificate is what evidences their ownership of shares and allows for the transfer of shares. Indeed, an application will need to be made to the company to change the name of the share certificate. 

Losing Share Certificates

If a share certificate is lost, stolen or destroyed, the shares are not lost. Instead, the company can reissue a certificate. In such an instance, the shareholder will need to write to the company and provide a statement. This statement will need to declare that the share certificate has been lost and not sold or otherwise disposed of. 

Likewise, 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 will need to be returned to the company. Fortunately, the use of digital share certificates has removed many of the issues relating 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. Share certificates will include:

  • company details;
  • purchaser details;
  • details of the shares themselves, including the number owned, class owned and the amount paid.

If you need help with issuing share certificates, our experienced business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions 

What is a share certificate?

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. 

Why are share certificates important?

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. 

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