What you need to know about share certificates
A Share Certificate is a written document that serves as legal proof of ownership of a specific number of shares in a company as at a particular date. Share Certificates must be issued by a company after incorporation to its shareholders on receipt of money for capital, and function like bank certificates of deposit (CDs) that require you to invest funds for a specific period of time (called the “term”). The certificate therefore validates and protects your ownership and interests in a company, and is therefore an important aspect company activities that you should look into.
What does a Share Certificate look like?
Share Certificates may be issued on paper or electronically depending on the type of company. Paper certificates are applicable only to private limited companies in Singapore while those for public listed companies are electronically issued and transferred.
A Share Certificate is required to contain the following information:
Company’s full name and address of the head office
Company registration number
Information about the class of shares, whether the shares are wholly or partly paid up and the amount (if any) unpaid on the shares
Shareholder’s name to show to whom the share is being issued
With effect from 31 March 2017, companies and limited liability partnerships (LLPs) are no longer required to use the common seal in the execution of Share Certificates, along with other documents such as a deed; the signature of authorised persons is sufficient to execute such documents.
How are Share Certificates issued?
Share Certificates are prepared and issued by the company secretary who also maintain the register of shareholders that will record the following information:
Share Certificate number
Shares being transferred
The secretary will then prepare these certificates to ensure that each certificate number is unique. Shares and consequently Share Certificates can then be issued by the company, with the certificates signed by any two directors. If the company is incorporated with a single director (allowed in Singapore), then one director and one secretary shall sign the certificates.
It is common practice for the company secretary to retain a counterfoil portion of the certificate or a note signed by the shareholder acknowledging receipt of the Share Certificate.
When are Share Certificates issued?
1. Allotment of shares
A share allotment takes place whenever there is issuance of new shares to new shareholders by the company. This increases the total number of issued and paid up shares without affecting existing shareholders since no shares are being cancelled. Following the issuance and subscription of shared by new or existing shareholders, the company secretary shall prepare the necessary documents required, including:
(i) Director’s Resolution recording the allotment of shares;
(ii) Lodgement with the Accounting and Corporate Regulatory Authority (ACRA) for a “return of allotment” within 14 days; and
(iii) Preparation of new Share Certificates.
After issuance and lodgement with ACRA, there is a time limit within which the new Share Certificates need to be issued.
2. Transfer of shares
A transfer of shares takes place when a shareholder sells or gives his/her share to another party (either an individual or corporation).
The transferor (person holding the original Share Certificate) will be required to surrender the original Share Certificate to the company for cancellation (when he/she ceases to be a shareholder) or rectification (when he/she transfers part of their shares to another person) within the deadline of a written share transfer being made.
The company will then be obliged to issue a new Share Certificate to the transferee (person who will be holding the new Share Certificate) within 30 days of registering the transfer.
Share transfers will only be effective once the ACRA has updated the electronic register of company members that all private companies are required to submit.
3. Loss of certificate
In the event a Share Certificate is lost, or destroyed, the owner of the certificate can apply to the company to request for a duplicate certificate. They would, however, be required to provide the following:
A statutory declaration that the certificate has been lost or destroyed, and that the Share Certificate was not pledged, sold, given to, or disposed of, and that a proper search for the certificate was made;
A written undertaking that in should the owner find the lost certificate, it shall be returned to the company.
In addition, if the value of the shares is greater than $500, the shareholder may be required to carry out additional steps:
Inserting a newspaper advertisement that the Share Certificate has been lost or destroyed, and the owner intends to apply for a duplication copy; and/or
Company may require the shareholder to provide a bond for an amount up to the shares’ current market value to indemnify against any losses in the event the original Share Certificate is found by others.
The original Share Certificate will then be cancelled by the company secretary, while the duplicate certificate is prepared and the register of shareholders and register of allotments are updated.
Safekeeping of share certificates
Share Certificates should be kept in safe custody, given their importance. In most cases, Share Certificates are kept with the company secretary so that they are safe and accessible, with shareholders issued with copies. It is also possible for shareholders to keep the original Share Certificates while the secretary keeps certified true copies of these certificates.