A share certificate is the name of the paper certifying the right of its owner to the number of certain shares of the company indicated in it. Share certificates are issued on paper with the introduction of all the necessary degrees of protection, such as: watermarks, fine engraving, etc. In addition, the company stamp and the signature of at least one of its directors are affixed to it.
In the event of a change of ownership (for example, after resale), a new share certificate is issued. If a part of the number of shares specified in the certificate is sold, then a new certificate is also issued to the buyer, and the seller receives a so-called balance certificate. Such mandatory formalities make it impossible to directly sell the certificate (or part of the shares inscribed in it) to another person, without applying for a new paper (new shareholder and new balance certificates).
An interesting feature of a share certificate is that dividends on shares are transferred to the owner of the certificate by mail.
The share certificate contains the following basic information:
- The number of acquired shares of the company;
- The class (or type) of these shares. Ordinary or privileged**;
- Series and numbers of all shares to which the issued certificate entitles.
There are also so-called street certificates. This is a form of a share certificate that is issued (registered) in the name of a broker or dealer but in fact belongs to the one who paid money for the shares. This form greatly simplifies the formalities associated with the sale and purchase of share certificates and therefore has gained particular popularity among investors. In this case, dividends on shares are transferred first to the account of the intermediary (the broker or dealer for which the street certificate is registered), and only then are transferred directly to the shareholder.
Preferred shares do not give their owner the right to vote, and therefore, the possession of them in any quantity will not be able, at least to some extent, to allow him/her to take part in the management of the company’s business. But this type of shares allows its owners to regularly receive dividends on them (regardless of whether they are paid on ordinary shares, or it was decided to cancel them). This type of shares is preferred by minority shareholders.