This is a legal document which proves the stock or share ownership in an organization. The original certificate is usually issued as proof of the transfer of the shareholding. Normally a company issues stock and shares when they decide to go from a private company to a public market for different reasons. When this happens, the first stock offer is called an Initial Public Offering (IPO) and it can also issue more stock if it needs to.
Your stock certificate template will depend on the type of stock or share that you need. When an individual purchases stock in a company, he/she will get a stock certificate that proves his/her ownership. The buyer and the issuer use this certificate to safeguard legal rights when:
- The buyer must prove their ownership to a stockholder.
- The buyer must prove they were issued stock shares from a new company.
- The buyer must prove the stocks transferred to the holder from the previous holder.
Information necessary in a stock certificate
A formal stock certificate template will have these fields for the following information:
- Name of the organization issuing the stocks
- Location of the organization issuing the stocks
- The buyer’s name
- The Certificate Number
- The number of shares
- Minimum price/shares
- Common or preferred stock
- Date of issuance
- Official corporate seal if available
Common Considerations when applying for a stock certificate
There are certain things that you should keep in mind when you are applying for a stock certificate:
You should be mindful when apply for a stock certificate, you should keep in mind these conditions:
- The certificate won’t mention any securities bought, only the shares that purchased are mentioned.
- The registered stock certificate will also include the percentage of the title for the stockholder along with the total number of shares.
- The document used to make the stock certificate has a unique background to prove the legitimate of the certificate.
- A registered stock certificate can be used in legal proceedings by a stockholder.
- Normally, organizations only issue certificates the first time they go public, they may not issue certificates every time they buy shares.
- If a certificate is lost, you can issue a new one but not before you paid a fine for it. Most companies today store their stock certificates online thus the chance of getting them lost is close to none.
- The signature you used in the certificate can’t be administered electronically.
Types of Stock Certificates
Registered stock certificates: Shareholders are proven by owning a registered stock certificate, as it is a proof of title and record for the shareholders.
Bearer stock certificates: This is an exclusive stock certificate for the stockholders and gives them all legal rights that associated with it. But they are rare now and were usually used for shares that were bought offshore and used to transfer title from one assets to another that were owned by the organization issuing the stocks without the need to pay stamp duty.
Determining the Value of Old Stock Certificates
If the organizations go through different phases such as losing their privilege as an active company under the certificate; merge with another company or decide to change their official company name… doesn’t mean that they are not financially active and there are many ways to check the value of their stock certificates, we will go into detail below:
Usually, stock certificates are kept by official organizations such as a brokerage firm, a bank or a transfer agent, but they are typically use for certificates of deposit and bonds.
Many brokerage firms that handle stocks and bonds hold certificates in street name. What this means is that they keep the record electronically which enable them to make fast purchases, make dividend payments and conduct sales through the underlying organization.
Direct Registration System
Most stock certificates are now processes through a Direct Registration System (DRS) which is an electronic database from transfer agents. This reduces the paperwork and costs overall in significant amount.
Types of Markets
There are two types of market: primary and secondary. A primary market is also called a new issue market and it allows companies to sell their stocks to raise more capital. IPO investors can sell the newly bought stocks to create an effective ‘trade route’ between buyers and sellers.
The stocks used in these transactions are already possess and have legal claim. The organization that issued new ones does not get any money in the bargain.
Why Organizations Issue Stocks
An organization typically issues stock so that it can raise capital for business expansion. For example, it might need to
A company will issue stocks when they are in need of more capital for business expansion, such as:
- set up a new factory
- Start new products
- Hire more employees for better production
- Merge with another company
- Get out of debt
- More flexibility in owner’s position
- Construct new building
- Pay for new inventories
- Make the company more valuable in the stock exchange
Privileges of a shareholder
- You now own a part of the company
- Regular progress report will be delivered to you
- Invitation to regular events