This is not a substitute for legal advice.  An attorney must be consulted.

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Is a Stock Certificate Necessary?

Various forms of stock certificates are acceptable; however, it should be stated upon the certificate that the stock was issued pursuant to a particular state and under the laws of that state.  In the event there are any specific restrictions on either the transfer of the stock or the stock ownership itself, the restrictions must appear on the face of the certificate.

Stocks may be issued for portions of monetary units.  Stocks may also be re-acquired, redeemed, converted or canceled.  Fractional shares may also be issued so long as the requirements of certain code sections are met.  Certain restrictions may be placed upon the transfer of stock, and options or warrants for the purchase of shares of the corporation may be permitted under state law.  Dividends may be paid to shareholders for earnings of the corporation; however, regulations may exist to assure that all shareholders of a given class are treated the same relative to share dividends.

The corporation may issue shares of stock with or without certificates and, in such cases, the corporations must send the shareholders a written statement of the information required on the certificates, particularly in regard to state code.  It is most common, however, for each corporation organized to issue certificates evidencing the shares of stock held.  At minimum, each share certificate should contain on its face the name of the issuing corporation and the laws under which it is organized, the name of the person to whom the share is issued, the number and class of shares issued and the designation of the series, if any, that the certificate represents.  If different classes of shares or different series within a class are permitted, then the designation's relative rights, preferences and limitations applicable to each class plus the variations and rights, preferences and limitations determined for each series, and the authority of the Board of Directors to determine such variations for future series must be summarized on the front or back of each certificate.  In the alternative, the certificates must state conspicuously that the corporation will furnish the shareholder such information in writing and without charge.  Also, each share certificate must be signed either manually or, in facsimile, by two officers designated in the ByLaws or by the Board of Directors, and the certificates may bear the corporate seal or the facsimile of the seal of the corporation.


Copyright © 1994 - 2014 by LAWCHEK, LTD.

This is not a substitute for legal advice. An attorney must be consulted.