What is a Stock Certificate?

Sometimes referred to as a certificate of stock, the stock certificate is a document that establishes the ownership of a specific number of shares in a stock that is issued by a given corporation. The stock certificate provides the legal ability to perform several different tasks involving the shares of stock. Among these rights and privileges are such essential tasks as trading the shares or participating in shareholder’s meetings.

Stock certificates are generally issued in two different types or categories. The first is known as a registered stock certificate. Registered certificates functions essentially as proof of ownership of the shares, with the name of the owner appearing in the corporation’s register of stockholders. A registered certificate of stock allows the owner to exercise all rights and privileges associated with being a shareholder in the company, including voice and vote in shareholder’s meetings.

The second form of stock certificates is known as the bearer stock certificate. Essentially, the entity that is in possession of the bearer certificate may exercise any an all privileges that are authorized by the actual registered owner of the shares. This may include trading the shares on behalf of the owner, or voting the shares at corporation stockholder meetings, if the corporation’s charter allows this type of activity.

From time to time, shareholders may choose to appoint a proxy or substitute to manage stock shares. The ability to utilize the services of a proxy is generally defined in the terms of purchase for the stock certificate and in the bylaws of the corporation that issues the share certificate. In most cases, the proxy has limited powers and will only cast votes according to the wishes of the legal owner of the shares. A proxy may also handle the sale of shares of stock on behalf of the stockholder, always working within perimeters that are set by the proper owner of the shares and in accordance with the terms of issue that govern the stock.