Share Certificates: Everything You Need to Know

If you have invested in a company, surely you must have heard about the share certificate. These are the essential legal documents that prove the ownership of the company of shareholders. If you have just made an investment or you are a senior shareholder it is very important to consider a share certificate.  In this article we will explain to you about everything about the share certificate that you want to know about. In this we will tell what the share certificate and its importance are, as well as its goals and also tell what you should do if you lose it.

What is a Share Certificate?

Share certificate is a formal document that the company issues to an individual or entity on confirming that the person/entity owns a particular number of shares in that company. It can act as proof in a legal case to claim the shares and few other critical details like: Name of the shareholder, Number of shares owned, Date of issuance. 

Format of a Share Certificate

Now you’ll be aware of some of the most important details of a general share certificate here:

1. Official company name: Name under which the issuance of shares from the company is done.
2. Company registration number: It is a unique identification allotted to the company by Companies House (UK).
3. Shareholder’s name: The person or organisation that actually owns these shares.
4. Shareholder’s address: Address registered by the shareholder.
5. Certificate’s number: A unique identification number each share certificate has.
6. Number of shares: The exact number of shares belonging to that shareholder.

Type of shares 

We will tell you about the three main types of shares.

1. Equity Shares

Equity shares represent ownership in a company and are generally regarded as shares with voting rights. Shareholders may receive dividends, which are contingent on profits, but there is no obligation on the company to pay dividends. During liquidation, equity shareholders would be the last to be paid after all liabilities and after preference shareholders.

2. Preference Shares

Preference shareholders have a superior claim on dividend payments as well as repayments during liquidation as compared to equity shareholders. They generally receive fixed dividends but do not have any voting rights in a company’s affairs. Consequently, preference shares are less risky compared to equity shares.

3. Ordinary Shares

These are the most widely held equity shares that confer ownership in the company. Shareholders benefit from any growth of the company in view of appreciation in value and dividends but at the same time take on considerable risk. Voting rights are conferred upon the ordinary shareholders, who would be the last to get a share of asset distribution in the event of liquidation.

Importance of Share Certificates

We will be aware of some of the important things here that you will find out why the share certificate is important.

Proof of Ownership

A share certificate is legal evidence that a person or entity owns shares in a company. It also has information about the name of the shareholder, the number of shares, and the registration of the company, thus making it secure and authentic in terms of ownership.

Legal Recognition in Disputes

In a case of any legal dispute with reference to shareholding, a share certificate acts as the main evidence. It helps to resolve conflicts pertaining to ownership, inheritance claims, or cases associated with fraudulent transfer of shares.

Facilitates Share Transfer and Sale

When a shareholder wants to sell or transfer shares to someone else, the share certificate is required to effect a sale. This acts as an assurance that the transaction is bona fide and authorized by the company.

What is a Share Company?

A share company is an institution for the issuance of shares toward capital acquisition. Once individuals decide to buy shares, they become owners of the business. Shareholders will reap rewards through dividends and can also benefit from the growth of such a company. 

We will talk about some of the important types of share certificate here as the following:

1. Public Limited Companies(PLC)

A public limited company (PLC) is a company that gets its shares into the hands of the public via stock exchanges so that a buyer or a seller can in principle freely transact. Such companies are bound by strict regulatory requirements and disclose their financials to ensure transparency. PLCs can raise huge amounts of capital from the public, making them suitable for large-scale operations and expansion.

2. Private Limited Companies(Ltd) 

A private limited company is a company that issues shares privately and does not offer its shares for public trading in the stock markets. Ownership is therefore primarily restricted to a small group of investors, such as founders, family members, and private investors. In comparison to PLCs, Ltd companies, while limiting investment from the public, impose less regulatory constraint on owners and grant more control to them.

Shareholder Certificate and Companies House

Within the confines of the UK, the private limited companies are required to maintain accurate records of shareholders. Most times, the information is kept at Companies House, the government agency responsible for corporate regulation. Share certificates in the UK are not allowed to be printed by Companies House. Not-withstanding, companies are supposed to keep their share register intact.

What to Do if You Lose a Share Certificate?

If you lose a share certificate, immediately inform the company or its registrar in writing to prevent fraudulent use. The company may ask you to provide details such as your name, shareholder identification, and the number of lost shares. You might need to file a formal affidavit or indemnity bond to confirm the loss and protect the company from liability. Some companies may charge a fee or require newspaper advertisements to declare the lost certificate as invalid. Once verified, the company will issue a duplicate share certificate, restoring your ownership rights.

Share Registration

Share registration entails the recordation of shareholders’ particulars in the official registers of the company to confer legal ownership of shares to these parties and serve the purpose of issuance of share certificates. This register has to be updated whenever there is a transfer or sale of shares.

End of Tax Year in the UK and Its Impact on Shares

The UK tax year is important to manage tax liabilities by both individuals and companies, especially at the end of the year. Most of them sell shares so that the gain is within the Capital Gains Tax (CGT) allowance and do not have to pay taxes on the profit gained till the next tax year. A lot of them also maximize contributions into tax-efficient accounts like ISAs and pensions to reap the rewards of exemption. High fluctuations in share prices are witnessed as most traders change portfolios in preparation for tax planning. So, at times companies declare dividends just before the end of the tax year, therefore, influence whether an investor should hold or sell shares.

Conclusion

It is an important document that provides evidence to the owner regarding the holding of shares within a company. Hence, understanding forms, purposes, and lawfulness of share certificates will help the shareholders to manage their investments efficiently. There is a procedure to replace lost share certificates. Selling certificated shares also requires meticulous handling to allow for smooth transfer. Tax deadlines and share registration procedures are important for maximising benefits to shareholders. Serviced Offices at Liscard Business Centre offer an option for an office space viewed as prestigious, whereby conditions can be adjusted according to the client’s requirements. Get one professional environment whose decoration reflects your image now!