{"id":6951,"date":"2019-12-29T11:57:13","date_gmt":"2019-12-29T11:57:13","guid":{"rendered":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/?p=6951"},"modified":"2024-05-01T00:44:52","modified_gmt":"2024-04-30T23:44:52","slug":"replace-lost-share-certificate","status":"publish","type":"post","link":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/replace-lost-share-certificate\/","title":{"rendered":"How to replace a lost share certificate"},"content":{"rendered":"
Misplacing a share certificate does not affect the legal position regarding ownership of shares, but it can result in administrative delays and expenses if a shareholder wants to transfer or sell their shares. Below, we discuss the procedure for replacing a lost share certificate.<\/p>\n Transfer shares in your company today - for only \u00a369.99<\/span><\/a>\n \n A share certificate is a legal document that is created by a company limited by shares and distributed to its shareholders to prove ownership of shares in the company. It\u00a0 provides independent evidence of title to shares (as per s.768 Companies Act 2006<\/a>) and enables its holder (the shareholder) to sell or transfer these shares to a new owner.<\/p>\n Share certificates should generally be issued within two months after shares have been allotted, i.e. following purchase or transfer. According to section 24(1) of the model articles<\/a> for private companies limited by shares: \u201cThe company must issue each shareholder, free of charge, with one or more certificates in respect of the shares which that shareholder holds.<\/em>\u201d<\/p>\n Share certificates are normally required whenever company shares are transferred or sold. The vendor\/transferor needs to return their existing certificate to the company which will cancel this and issue a new certificate to the purchaser\/transferee. Other circumstances in which share certificates need to be provided include:<\/p>\n Section 24 of the model articles<\/a> for private companies limited by shares specifies the information which should be included on each share certificate and other requirements:<\/p>\n \u201c(2) Every certificate must specify –<\/em><\/p>\n (a) in respect of how many shares, of what class, it is issued;<\/em>\u201d<\/em> – this states the number of company shares which are owned by the bearer of the share certificate and defines the class of shares (e.g. ordinary shares, non-voting shares, preference shares, deferred shares, etc).<\/p>\n \u201c(b) the nominal value of those shares;\u201d<\/em> – the nominal value is the minimum price at which shares can be issued (e.g.1p or \u00a31 etc.) and it can never be issued for less than this value.<\/p>\n \u201c(c) that the shares are fully paid; and\u201d<\/em> – although these model articles require the shares are fully paid (i.e. the full nominal value of the shares has been paid by the shareholder), it is possible to also have partly paid shares (e.g. if the nominal value is \u00a31 and the shareholder has only paid 50p) or unpaid shares (i.e. the shareholder has not paid anything up front for the shares). Note that in the case of partly paid and unpaid shares, the directors can send a \u2018call notice\u2019 to shareholders requesting they pay the company a specified sum of money, which may be some or all of the unpaid amount, in respect of any shares they hold. See our blog on paid, unpaid and partly paid shares<\/a> for more information.<\/p>\n \u201c(d) any distinguishing numbers assigned to them.\u201d<\/em> – this is generally the share certificate number.<\/p>\n What is a shareholders\u2019 agreement and why do I need one?<\/span><\/a>\n \n \u201c(3) No certificate may be issued in respect of shares of more than one class.\u201d – <\/em>if the shareholder owns more than one class of shares, a separate share certificate must be issued in respect of each different class.<\/p>\n \u201c(4) If more than one person holds a share, only one certificate may be issued in respect of it.\u201d – in the case of joint shareholders, all names can be included on one share certificate, with the address of the first named shareholder.<\/em><\/p>\n \u201c(5) Certificates must –\u00a0<\/em><\/p>\n (a) have affixed to them the company\u2019s common seal, or<\/em><\/p>\n (b) be otherwise executed in accordance with the Companies Acts.<\/em>\u201d – <\/em>traditionally companies had their own unique corporate seals (originally using melted wax) and some still use modern versions of seals to execute official company documents. However, under section 44(2) of the Companies Act 2006<\/a>, an alternative to a seal for validly executing documents is a signature on behalf of the company \u201cby two authorised signatories, or \u2026 by a director of the company in the presence of a witness who attests the signature.<\/em>\u201d<\/p>\n Other information which needs to be included on share certificates includes:<\/p>\n Section 25 of the model articles<\/a> for private companies limited by shares deals with some of the matters pertaining to replacement of share certificates, including:<\/p>\n \u201c(1) If a certificate issued in respect of a shareholder\u2019s shares is –\u00a0<\/em><\/p>\n (a) damaged or defaced, or<\/em><\/p>\n (b) said to be lost, stolen or destroyed, that shareholder is entitled to be issued with a replacement certificate in respect of the same shares.<\/em>\u201d – this essentially confers a right on shareholders to request a replacement share certificate.<\/p>\n \u201c(2) A shareholder exercising the right to be issued with such a replacement certificate –\u00a0<\/em><\/p>\n (a) may at the same time exercise the right to be issued with a single certificate or separate certificates;<\/em>\u201d – in addition to the case of different classes of shares which must be split into separate share certificates, a shareholder may have acquired separate share certificates of the same class if they purchased the same class of shares on multiple occasions. Share certificates of the same class can be consolidated into a single certificate.<\/p>\n \u201c(b) must return the certificate which is to be replaced to the company if it is damaged or defaced; and”<\/em>\u00a0– if the share certificate has not been lost, then it should be returned.<\/p>\n \u201c(c) must comply with such conditions as to evidence, indemnity and the payment of a reasonable fee as the directors decide.<\/em>\u201d – if a share certificate has been lost, the company may request details\/evidence pertaining to its loss (e.g. if it was stolen during a burglary, the crime reference number provided by the police may be requested). An administration fee may be levied for issuing a replacement certificate. Finally, an indemnity will normally be sought from the shareholder, which essentially covers the company in case of any liability incurred as a consequence of issuing a replacement certificate. It may also be necessary to obtain a guarantee by a third party – see below.<\/p>\n Set up a company with multiple share classes - for only \u00a369.99<\/span><\/a>\n \n The general procedure for dealing with requests to replace lost share certificates is as follows:<\/p>\n As discussed above, before issuing a replacement share certificate, companies will normally seek an indemnity from the shareholder. This is essentially an agreement under which the shareholder is obligated to cover any losses incurred by the company in connection with the replacement of the certificate.<\/p>\n Issue new shares in your company today - for only \u00a379.99<\/span><\/a>\n \n In certain cases (especially where there is a significant shareholding), the company may request that a third party – usually a bank or insurance company – provides a guarantee in respect of the indemnity. In effect, the third party will countersign the indemnity provided by the shareholder, and they will be ultimately responsible for ensuring that any losses sustained as a result of the replacement certificate being issued are recovered.<\/p>\n Traditionally, share certificates have been issued in paper form, and millions of shareholders still rely on tangible documents. Indeed, it is estimated that the majority (6 in 10) of private shareholders still hold their shares in the form of paper certificates. However, under EU law – Central Securities Depositories Regulation (CSDR) 909\/2014 – companies will not be allowed to issue new paper share certificates from January 2023.<\/p>\n Any existing paper share certificates will need to be converted to digital format by 2025. This process is known as \u2018dematerialisation\u2019 and, once complete, will render paper certificates worthless.<\/p>\n It should be noted this process of dematerialisation began in 1996 in the UK, with the launch of the Certificateless Registry for Electronic Share Transfer (CREST<\/a>). Most public listed companies adopted CREST but, due to costs, many private limited companies avoided it and continued to issue paper share certificates.<\/p>\n Understanding limited company shares<\/span><\/a>\n \n The main current trend for private shareholders – particularly where shares are intended to be actively traded rather than held for long periods of time – is to hold shares through the nominee account of a stockbroker. In this case, the shares are registered in the name of the stockbroker but the shareholder has beneficial ownership. But there are some downsides to nominee share ownership, e.g. it is more difficult to vote on shareholder issues and attend AGMs.<\/p>\n"},"excerpt":{"rendered":" Misplacing a share certificate does not affect the legal position regarding ownership of shares, but it can result in administrative delays and expenses if a shareholder wants to transfer or sell their shares. Below, we discuss the procedure for replacing a lost share certificate. A share certificate is a legal document that is created by…<\/p>\n","protected":false},"author":10,"featured_media":6953,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false},"categories":[141],"tags":[],"class_list":["post-6951","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-shares-shareholders","category-141","description-off"],"acf":[],"yoast_head":"\nWhen are share certificates needed?<\/h3>\n
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What information is included on a share certificate?<\/h3>\n
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What is the procedure for replacing a lost share certificate?<\/h3>\n
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What is a third party indemnity guarantee?<\/h3>\n
Are share certificates always in paper form?<\/h3>\n