While there have been lots of attempts to retire them, a large number of companies remain attached to a paper share certificate.
When you form a new Limited Company there are many things which you may encounter for the first time. In this article we consider the specifications for a company share certificate, what should be included and the process of issuing them.
What are share certificates and why should a company issue them?
A share certificate validates that on a specific date a person is the certified share owner in a company. With regards to Companies Act 2006, it is deemed prima facie evidence (‘enough evidence except the contrary is publicised’ in Scotland) of the member’s share ownership in the company.
On the other hand, whilst a share certificate may be given by a company, it is a pass in the member’s register that offers legal confirmation of share rights in the company whenever trading with share certificates. Thus, it is essential to also refer to the member’s register to ensure the two are reliable.
What are the information/ details that are shown on a share certificate?
The information that ought to be added as part of a share certificate template includes:
- The name and registered number of the company
- A distinct share certificate number
- Enlisted office address of the company
- Shareholder’s name
- Share class or type
- Shareholder’s address
- Quantity of shares the share certificate covered
- The degree to which the shares are paid up (normally shares are paid fully)
The ideal share certificate template must have space for all these.
A share certificate needs to be signed by:
- Two company’s directors; or
- A director and the company’s secretary; or
- In the event that the company has no company’s secretary but single director then, the company director in the presence of an eyewitness who confirms to their signature.
Every share certificate must be dated on issue.
When should a share certificate be issued?
Subject to any condition to the contrary in the company’s Articles of Association, there exists a legal time limit for allotting a share certificate. After your primary enlistment, company share certificates should be issued to subscribers within two months. Generally, this is carried out as part of the first board meeting. Thereafter, a company have to within two months of share issuance allot the share certificate that represents those shares. This same two month time limit applies subsequent to any share transfer. Even though share certificates need to be issued to the enlisted holder, you are not under any condition to forward a copy of the share certificate to HMRC or Companies House.
Any other rules for allotting share certificates?
Just like with other areas of company management, prior to issuing share certificates it is important to check the company’s Articles of Association for any specific requirements. The benchmark practice is for any business to allot a single share certificate in respect of all the shares allotted at a specific time, even though a shareholder can ask for split share certificates. The other major case where above one share certificate will be necessary is when share certificates represent holdings in more than one share class – even though they are owned by the same shareholder, you will have to issue a different share certificate for the shares in every class.
For a mutual shareholding, whilst it is good to add the name of every individual holder on the certificate, only the address of the initial named holder must be shown. In addition, you only need to allot a share certificate for a mutual shareholding – with the certificate forwarded to the initial named subscriber instead of a separate certificate to every mutual shareholder.