Stock certificate

Stock certificate

In corporate law, a stock certificate (also known as certificate of stock or share certificate) is a legal document that certifies ownership of a specific number of stock shares (or fractions thereof) in a corporation. In large corporations, buying shares does not always lead to a stock certificate (in a case of a small number of shares purchased by a private individual, for instance).

Usually only shareholders with stock certificates can vote in a shareholders' general meeting. Sometimes a shareholder with a stock certificate can give a proxy to another person to allow them to vote the shares in question. Voting rights are defined by the corporation's charter and corporate law.

Stock certificates are generally divided into two forms: registered stock certificates and bearer stock certificates. A registered stock certificate is normally only evidence of title, and a record of the true holders of the shares will appear in the stockholder's register of the corporation. A bearer stock certificate, as its name implies is a bearer instrument, and physical possession of the certificate entitles the holder to exercise all legal rights associated with the stock. Bearer stock certificates are becoming uncommon: they were popular in offshore jurisdictions for their perceived confidentiality, and as a useful way to transfer beneficial title to assets (held by the corporation) without payment of stamp duty. International initiatives have curbed the use of bearer stock certificates in offshore jurisdictions, and tend to be available only in onshore financial centres, although they are rarely seen in practice.

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