Stock Certificate

A stock certificate is a legal document that certifies ownership of a specific number of shares of stock in a corporation. Stock Certificates are issued to shareholders in exchange for something of value — money, time or other assets, such as personal services — contributed by those shareholders to the corporation. The provision of services for the shares is a taxable event to the shareholder, while the contribution of money is not. The certificate is usually held by the shareholder himself or herself, and sent to the shareholder after the purchase or acquisition of stock. Occasionally the stock certificate is held in trust by a trustee on behalf of the shareholder. Many states do not require the issuance of hard copy stock certificates to validate the issuance of stock. Oregon and Delaware, for example, allow documents called notices of issuance to be issued to shareholders in lieu of hard copy stock certificates. Notices of issuance can be issued electronically. For that matter, so can stock certificates, but it is unusual to see electronically maintained stock certificates, although they will undoubtedly become more popular, as legal documentation is moving away from hard copy paper format and towards a digital format. If a stock certificate is lost or stolen, the shareholder usually has to sign a document indicating that happened in order to obtain a new stock certificate from the corporation.