Definition
A Stock Certificate is a physical, written instrument that certifies ownership of a certain number of shares or a specified portion of a corporation. These certificates serve as legal documents representing a shareholder’s ownership stake in a company.
Examples
- Common Stock Certificate: Often represents shares in a corporation that provide the shareholder voting rights and dividends.
- Preferred Stock Certificate: Represents shares that typically offer fixed dividends and have a higher claim on assets than common stock, but may not come with voting rights.
- Share Certificate in Private Corporation: Although not publicly traded, privately-held corporations still issue stock certificates to shareholders representing their ownership in the company.
Frequently Asked Questions (FAQs)
1. What information is typically included on a stock certificate?
A stock certificate usually includes the corporation’s name, the shareholder’s name, the number of shares owned, and a unique certificate number. It may also have the corporation’s seal and signatures of company officers.
2. Are stock certificates still used today?
While electronic records have largely replaced physical stock certificates, some companies and shareholders still prefer issuing and holding paper certificates.
3. How do you replace a lost stock certificate?
To replace a lost stock certificate, the shareholder typically needs to contact the issuing company or its transfer agent, complete the required documentation, and potentially pay a fee.
4. Can a stock certificate be transferred to another person?
Yes, stock certificates can be transferred. The back of the certificate usually includes a transfer form that must be completed, signed by the original owner, and sent to the company’s transfer agent.
5. What is the difference between stock certificates and stock in digital form?
Stock certificates are physical documents representing ownership, while stock in digital form (book-entry form) records ownership electronically without the need for physical documents.
Related Terms
1. Shareholder
A person or entity that owns one or more shares of stock in a corporation and has an interest in the company’s profits and assets.
2. Equity Security
A type of security that represents ownership interest in a corporation, mainly in the form of common or preferred stock.
3. Dividend
A portion of a corporation’s earnings distributed to shareholders, usually on a regular basis, depending on the company’s policy and profitability.
4. Transfer Agent
A third-party organization assigned by a corporation to manage and maintain records of shareholders and handle the transfer and issuance of stock certificates.
5. Capital Stock
The total amount of stock authorized for issuance by a corporation, including both common and preferred stock.
Online References
- Investopedia: Stock Certificate
- SEC: What to Do if You Have Lost Your Stock Certificates
- Wikipedia: Stock Certificate
Suggested Books for Further Studies
- “Stock Investing For Dummies” by Paul Mladjenovic
- “The Intelligent Investor” by Benjamin Graham
- “Common Stocks and Uncommon Profits” by Philip Fisher
- “The Essays of Warren Buffett: Lessons for Corporate America” by Lawrence A. Cunningham
- “Investing 101: From Stocks and Bonds to ETFs and IPOs, an Essential Primer on Building a Profitable Portfolio” by Michele Cagan
Fundamentals of Stock Certificates: Finance Basics Quiz
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