Stock Certificate Help Guide

Our stock certificate will help your company facilitate issuing stock to shareholders and may be used by shareholders as evidence of ownership. The following provides additional details on key information in your document.


Certificate Number and Share Number

The top of your certificate identifies the certificate number and number of shares being issued. If this is the first stock certificate being issued by the company, then the certificate number should start at 1 or 0001. However, if this is not the first certificate, then it should be the next number in sequence after the prior certificate issued by the company. The share number listed represents the total number of shares issued on the certificate.

Joint Ownership

If the certificate is being issued to more than one person or business entity shareholders, then the first paragraph will identify the type of joint ownership. The three main types of joint ownership for stocks are tenancy in common, joint tenancy, and community property ownership.

A tenancy in common is an interest in property held by two or more people that all own an undivided interest as to the whole property; however, these interests do not have to be in equal shares. Also, the tenants in common do not have rights of survivorship. This means that when one dies, that person's share in the property goes to his or her named heirs or beneficiaries.

A joint tenancy is an interest in property held by two or more people that all own equal interests, and each joint tenant has a right of survivorship.

"Community property" ownership occurs where the stock is being acquired by both spouses during marriage while living in a community property state. The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Spouses living in Alaska may choose to opt in to community property ownership during marriage.

Par Value

Not all stock has a par value. The par value of a corporation's stock is normally specified in the company's articles of incorporation (known in some states as the certificate of incorporation). If no par value is stated in that document, then your certificate should reflect this, stating "no par value."

Par value is the nominal value, or face value, of the stock and helps determine the value of the shares at a later date. Most corporations start out by issuing stock with nominal or little par value—for instance, $0.01 or $0.001 per share—and the worth of the shares will increase as the company grows.

Transfer Restrictions

Transfer of securities, such as stocks and bonds, is closely regulated by federal and state governments. Your certificate will identify these transfer restrictions, both in the main document and in restrictive legends at the end of the document, so that the shareholder understands the need to ensure conformity with all applicable laws and company agreements prior to selling or transferring the shares.

If you indicated that the company already has an agreement between the company and shareholders in effect restricting share transfers, then your certificate will specify such agreement. Common examples include bylaws, articles of incorporation, and shareholders' agreements.

However, regardless if your company has any such restrictive agreements, your certificate will still include some general language requiring the shareholder to comply with any such agreements that may be in effect at the time the shareholder wishes to transfer the shares. This is meant to protect the company in the event it enacts restrictive agreements at a later time so that the shareholder cannot sell the shares without informing the company and claim no notice was ever received.

Transfer Section

This section should not be filled in until the shareholders receiving stock via the certificate wish to sell or otherwise transfer the shares to new owners. The paragraph should indicate the shareholders transferring their shares, the recipients of those shares, and the total number of shares being transferred. If there are multiple shareholders owning as tenants in common, then they should list the number of shares being transferred by each shareholder next to the applicable signature line.

Signatures

In addition to the shareholders transferring their shares, an officer of the corporation should sign as a witness to the transfer. This will help avoid any disputes that may occur down the road where the company may claim it never received notice of the transfer.

Restrictive Legends

The capitalized legends at the end of the certificate represent required notices to inform the shareholders that they must comply with the applicable laws and company agreements restricting the sale, transfer, or pledge of the shares.

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