Generally. This article pertains to small, closely held corporations and not larger and, sometimes, publicly held corporations.
A stock certificate is an historical anachronism as most state statutes do not require this to show ownership, relying instead on your subscription agreement and the company stock ledgers, which are maintained and backed-up electronically.
You may, however, request a certificate from the company, and they must issue you one. A stock certificate is nothing more than a piece of paper evidencing your ownership of a certain number of shares in a corporation. For legal purposes, electronic ownership records are every bit as viable for proof in a court of law as a stock certificate; therefore, physically possessing this piece of paper (certificate) provides no real legal benefit. In fact, if you lose the certificate, you will be required to spend money on a bond to get the certificate replaced, which is generally not a negotiable matter with the company.
When you purchase stock, you are buying an ownership stake in a company equal to the number of shares and percentage the certificate represents. The number of shares you buy in relationship to the number of shares the corporation has issued determines your ownership percentage. The corporation generally may issue may shares of stock, which would reduce your percentage of ownership.
Most small corporations do no issue stock certificates; however, they are legally obligated to do so if an investor requests a physical certificate.
A stock certificate generally contains several pieces of information including:
- Corporation's name and date of incorporation.
- Name of investor.
- Date the certificate has been issued.
- The number of shares evidenced by the certificate.
A certificate should also include the:
- Corporate seal.
- Signature of a corporate officer and a secretary attesting to the signature.
- Certificate number.
- State of incorporation.
- Address of corporate offices.
- Address of transfer agent, if any.
Stock certificates are no longer legally necessary to provide proof of stock ownership in a corporation. In fact, when buying and selling stock, this will delay a transaction because of the time involved in surrendering the physical certificate to the corporation and its reissuing a certificate to you. This could take several weeks, if not longer.
Issuing Stock Certificates. Only corporations can issue stock certificates. Other business entities such as limited liability companies have different methods for documenting ownership. A stock certificate proves that the holder has an ownership. A membership certificate proves ownership of a limited liability company. Partnership certificates are issued to owners of limited partnerships and limited liability partnerships.
Miscellaneous. A corporation's stock ledgers (not publicly available) should include every investor’s contact information, how many shares they own, and their stock certificate number, if any. A copy of the ledger should be safely stored electronically and backed-up in a secondary location. All stock certificates, when requested, should be physically delivered to the investor or delivered by registered service.