Share Certificate

What is a Share Certificate?

A share certificate is an official document issued by a company that certifies the ownership of a specified number of shares in the corporation held by a named shareholder.

It traditionally served as the physical proof of ownership of shares before the digital era when most stocks started being held in electronic form. However, in some contexts or jurisdictions, physical share certificates might still be used or required.

Benefits for People:

1. Proof of Ownership: A share certificate is tangible evidence of ownership, showing the exact number of shares a person holds in a particular company.
2. Liquidity and Transferability: Ownership through a share certificate can facilitate the process of selling or transferring the shares, especially in private companies or when electronic records aren't prevalent.
3. Legal Rights: It offers shareholders certain rights, including the right to receive dividends, attend shareholder meetings, vote on certain issues, and claim assets if the company liquidates.
4. Securitisation: If someone wishes to use their shares as collateral for a loan, having a share certificate can make the process clearer and sometimes easier.
5. Gift or Inheritance: Share certificates can be handed down as part of an inheritance or given as a gift, providing a tangible asset to pass on.

Benefits for Businesses:

1. Track Ownership: Share certificates help companies keep track of all their shareholders and the number of shares each one holds, especially useful for private companies without electronic tracking systems.
2. Legitimacy and Professionalism: Issuing share certificates can add a sense of legitimacy to a company, especially in its early stages, and can be seen as a sign of its professionalism and commitment to its shareholders.
3. Legal Protection: In the event of disputes or challenges about ownership, share certificates provide a tangible record that can be referenced or presented in legal contexts.
4. Investor Relations: Issuing share certificates can be a part of maintaining good relations with investors, ensuring that they feel their investment is recognised and valued.
5. Leveraging Investments: By issuing shares (and thereby share certificates), companies can attract investments without incurring debt, which can be beneficial for the financial health of the business.

In the modern age of electronic trading and dematerialised stocks, the significance of physical share certificates has diminished in many markets. However, they remain a crucial instrument, especially in certain situations and jurisdictions.

Their benefits span from legal protections to the tangible assurance of ownership.