What is a Stock Certificate?

In simple words, a Stock Certificate is a legal document that authenticates ownership of a company by owning several shares. Usually, the records of such ownership are kept in an electronic version in the broker’s server, but upon request, a paper format version of the same can be attained.

You are free to use this image on you website, templates, etc., Please provide us with an attribution linkHow to Provide Attribution?Article Link to be HyperlinkedFor eg:Source: Stock Certificate (wallstreetmojo.com)

Stock Certificate Template

Stock Certificate Template consists of the following:-

#1 – Names and Dates – It includes the name of the company whose stocks are being represented for ownership. Next, it contains the person’s name that has purchased the said number of stocks, verifying the reliability of such information. Finally, the date also holds an essential relevance to the day upon which one becomes the owner of such stock.

#2 – Certificate Number – Each certificate has its unique coding of the number, which the company issues to make it more convenient for tracking in case any issue or problem arises.

#3 – Number of shares – It also contains the number of shares one holds of the company.

#4 – Signature and Seals – The company authority who represents the company is the mandatory signature. Also, to authenticate the sign, the company authority makes seal stamping.

Advantages

  • #1 – It serves as evidence that the person who owns the certificate is a part of the ownership of the business enterprise. Since the certificate holds vital information about the stock owner and the number of shares he holds in the company, it is tangible proof that can be represented if asked.#2 – It can also be used for legal purposes in case any sort of legal dispute arises. If one ever gets in conflict regarding the ownership of the same, stock certification can come in handy to stop such disputes as solid proof

How is the Stock Certificate Issued?

The process of issuing a stock certificate is as follows;

  • A broker must be contacted by the brokerage firm holding the said stock for direct registration.The online purchase of stocks normally unofficially holds the brokerage firm’s name.Such a purchase means that the broker and the brokerage firm keep track of the same.For the paper certificate, the registration must be moved from the indirect form to the direct registration directly under the company’s name.Direct registration normally and automatically lists the stock certificate with the assistance of the appropriate transfer agent.Once the transfer agent has access to them, the certificate can be used.

Example of Stock Certificate

In a brokerage firm says XYZ Ltd Co, a broker has two investors that are Suresh and Ramesh. Suresh, being a more knowledgeable and educated guy who daily indulges in learning about the market trend and an in-depth analysis of every company’s performance. He normally likes to purchase shares in bundles from different companies, normally the blue-chip companiesBlue-chip CompaniesBlue chip stocks are issued by companies possessing large market capitalization. Blue chip companies are market leaders. They provide good returns on stocks, offer dividends, and are considered safe investments.read more. Whereas Ramesh, a very new entrant in the investment field, is still learning about the various kinds of investments he can make to expand his wealth. As per expert guidance, he invested only in one of the company’s shares and bought around ten of them under his name.

  • Now, when they have to obtain physical or electronic evidence of their ownership, there will be two types of certificates that the transfer agent company will issue, respectively, to Suresh and Ramesh.

  • Apart from keeping them in the electronic mode in the broker’s records, the physical certificate they will issue will be of two types—one, the stock certificate for Suresh, and a share certificate for Ramesh.Why such a difference? Suresh is not purchasing only one company share; his investments are with various other companies, while Ramesh deals with only one company for now. Hence, the transfer agent needs to be extra careful and check in with the broker’s record to see what kind of certificate needs to be issued.

This has been a guide to what a stock certificate is. Here we discuss the stock certificate template and the advantages of owning it, along with practical examples. You may learn more about our articles below on financing –

  • Floating StockAsset Purchase vs Stock PurchaseOutstanding Shares ExamplesStock Splits DefinitionCommon Stock vs Preferred Stock