Following on from our guide to limited company shares, this piece will lay out all you need to know about share certificates.
A share certificate is a legal instrument that acts as proof of purchase for shareholders. The certificate can be authenticated by the directors’ signatures or even by a branded company seal.
1. How do share certificates work?
The company, or entity, must give shareholders their share certificates within eight weeks of them being issued or any share ownership being transferred. This is upheld by law.
Share certificates (in England, which have been authenticated by a seal) is prima facie, or, ‘on the face of it’ evidence (in Scotland, they constitute ‘sufficient evidence unless the contrary is shown’), of one’s legal right of ownership of the shares.
2. How do I get a share certificate?
When you register your company, you will get your share certificates from Companies House or if you didn’t go to them directly, the company formation agent you may have used. You will also get your incorporation documents at this point, whether by email or post. You will have to pay for hardcopies, whilst electronic ones are included in the cost of company formation. You have the option to stamp the share certificates with your company seal or simply sign them.
3. What information is shown on a share certificate?
Here is a checklist of what must be included on share certificates:
- A unique share certificate number
- The company’s name and company registration number
- The registered office address
- The shareholder’s name and contact address
- The number of shares covered by the share certificate
- The type or class of shares
- The extent to which the shares have been fully or partly paid for at the point when the certificate was issued.
4. Do I have to issue one certificate per share?
You only require one certificate for each shareholder for each class of share bought on the same day, no matter how many shares have been acquired. This means that you have no need to issue multiple certificates for each share of the same class if issued on the same date.
If a shareholder is taking more than one class of share, then separate certificates for each class should be given to them. Another instance where separate certificates are required is when new shares are taken by an existing or a new shareholder at a later date or when existing shares are transferred from one person to another.
5. How do I issue certificates to joint shareholders?
If two or more people have an ownership stake in the same share, you still only need to issue one certificate, which each of these shareholders is allowed to duplicate for themselves. Each shareholder’s name should be visible on the certificate.
To conclude, the creation, issue and recording of shares and their ownership can be nuanced and different circumstances will mean slightly different rules and legal considerations. It is best practice for company directors and secretaries to keep abreast of any changes in legislation or seek assistance from a specialist before issuing official legal instruments such as share certificates.
MSP offers company secretarial and legal services and help businesses of all types and structures to focus on their core responsibilities and improve performance. If you need advice on how to form a company, request a call back.