30th September 2011 by NickWis

Do I need a share certificate?

When setting up a company, some directors will select the option of having printed share certificates made-up for the shareholders of their company. Although it is not a legal requirement to have share certificates, there are a number of benefits to the shareholders for having them in their possession, especially with regards to any dispute over ownership.

The company formation process requires the directors of a company to name at least one shareholder with one share, as is the legal requirement for UK companies. The number of shares issued and shareholders’ holding these is flexible depending on the company’s requirements, beyond the first. It is also important to note that companies may adjust their share capital throughout the company’s life. One of the benefits of a limited company is the flexibility that shares offer in terms of an extra source of funding. The share certificate is therefore an important document in any company that may bring in further shareholders at a later date.

Share certificates: avoid debate over ownership after company registrationThe share certificate is simply evidence that the person who is named on the document legally owns the shares that are numbered on the document. This should reconcile with the information contained in the company register.  This fact, therefore, illustrates the importance of handing over the share certificate when a transfer of shares takes place. In the event of a share transfer, the company must issue the new shareholder with a certificate within two months of the date that the transfer was lodged with the company.

A share certificate normally contains the following details:

  • Shareholder details: name and address
  • Company details: name and registration number
  • Share details: number and type of shares issued, on which date

As a certification of share ownership, this is a useful document to have printed, especially if there are a number of shareholders within a company. Generally, the physical share certificate will hold a good legal standing in any debate over ownership of shares within a company. The document is signed by the director and a witness, helping to extend the authentication of ownership.

The Company Seal

Most share certificates are stamped with some form of general Company Seal or Stamp. The company seal has become less prominent in the company registration process, though it used to act as a form of verification on official company documents. Therefore, stamping a share certificate can be helpful in verifying the validity of the ownership claim.

The need for a Company Seal was removed in The Companies Act 1985, though they are still used in the execution of certain documents, such as share certificates. However, traditional wax seals have been replaced by wafers that make the process easier.

Wisteria Formations offer printed share certificates for £15+VAT, and a personalised Company Seal for £35+VAT. If you have any questions, please contact our customer support team on 0844 893 0808.