Share certificates - what you need to know
Thursday 28 March 2013
Although there have been a number of attempts to retire them, a huge number of companies and shareholders remain attached to paper share certificates. In this article we look at the requirements for share certificates, what needs to be included in a company share certificate and the process of issuing them.
If, after reading about the requirements for a valid share certificate, you need to produce some share certificates, check out how you can use our free share certificate tool to create them. If you register today, you can also make use of the other great functionality in our FREE to use company secretarial package.
What are share certificates and why does a company need to issue them?
A share certificate, issued by a company, certifies on a certain date that a person is the registered owner of shares in a company. In terms of the Companies Act 2006, it is considered prima facie evidence ('sufficient evidence unless the contrary is shown' in Scotland) of the member's ownership of shares in the company.
However, while share certificates may be issued, it is an entry in the register of members that provides legal proof of ownership of shares in the company: whenever dealing with share certificates, therefore, it's important also to refer to the register of members to make sure the two are consistent. We'll talk more about the register of members more in another blog.
When do share certificates need to be issued?
Subject to any provision to the contrary in the company's Articles of Association, there is a time limit for issuing share certificates. After your initial registration, company share certificates must be issued to shareholders within two months - this is usually done as part of the first board meeting. A company must thereafter, within two months of allotting shares, issue the share certificates representing those shares. The same two month time limit applies following any transfer of shares.
While share certificates should be issued to the registered holder, there is no requirement to send a copy of the share certificate to Companies House or HMRC.
What information is shown on a share certificate?
The information that should be included as part of a share certificate is:
a unique share certificate number
the company's name and registered number
Registered office of the company
the name of the shareholder
the address of the shareholder
the number of shares held
the type or class of shares
the extent to which the shares are paid up (usually shares will be fully paid)
A good share certificate template will include space for all of these. Better still, a product like Inform Direct will automatically populate certificates with the required information from details already held.
A share certificate should be signed by:
Two company directors; or
One director and the company secretary; or
For companies with a single director and no company secretary, the company director in the presence of a witness who attests to his or her signature.
If your limited company has a company seal, this can be stamped on the share certificate in the presence of any of the same combinations of officers listed above.
Each share certificate should be dated on issue.
Are there any other rules for issuing share certificates?
As with other areas of company administration, before issuing share certificates it's worth checking the company's Articles of Association for any specific requirements.
The standard practice is for a company to issue a single certificate in respect of all the shares issued at a particular time, although a shareholder can request split certificates. The other main case where more than one certificate will be needed is where share certificates represent holdings in more than one share class - even if they are owned by the same shareholder, you'll need to issue a separate share certificate for the shares in each class.
For a joint shareholding, while it's good to include the name of each separate holder on the certificate, only the address of the first named holder needs to be shown. You also only need to issue one certificate for a joint shareholding - with the certificate sent to the first named holder rather than a separate certificate to each joint shareholder.
There are also further requirements for listed companies.
In another article we look at a number of scenarios involving share certificates, including what to do with share transfers, dealing with a lost share certificate and other cases where replacement share certificates may be needed.
Update 06/12/13 - take a look at how easy it is to produce and manage your share certificates in Inform Direct using our free share certificate template.