Share Certificates

To differentiate which shares belong to which shareholders, a numbering system called the distinctive numbers is used to identify each individual share. The system uses sequential numbers starting with number one which is linked to the first share and each following sequential number linked to the following share in an ascending order. This ensures that all issued shares have their own distinctive number and can be identified individually.

For a share certificate to be valid it must be signed by the directors.  It is also a good idea for the shareholder to sign it as well to validate the accuracy and authenticate the originality. Share certificates can’t be duplicated but they can however be copied – much like an ID document.  If they are copied the word COPY must be clearly printed on the certificate. If a share certificate is reprinted due to a company name change then the previous certificate must be cancelled and recorded in the company register.

The authorised share capital is the number of available shares created from nothing with the purpose of being issued to the shareholders. The authorised shares are dormant and have no value until they are issued to the shareholders.  It is essential to understand that the number of authorised shares has nothing to do with the value of the company and by issuing millions of authorised shares the value of your company does not increase, it simply complicates the calculations of issuing shares.  Not all the shares have to be issued to the shareholders as some can be held in reserve for future use. 

Yes, but then the word COPY must be clearly written on the certificate as there can only ever be one original share certificate. 

There are two main categories of shares namely ordinary shares and preferential shares. Ordinary shares are usually divided into two classes namely class A and class B which are actually just voting and non-voting shares. Preferential shares have many more categories such as Cumulative, Participatory, Convertible plus a few more.  

Classes of shares usually refer to ordinary share which can either have voting or non-voting rights and therefore referred to a Class A or Class B shares.

Par Value shares are shares fixed at a set value and do not fluctuate in price. The value of a par value shares is set by the directors of the company. This value is usually very low as it also represents the maximum amount of the liability the shareholders have towards the company. This is an outdated concept but unfortunately still used today by a few older companies. As we all know share prices do not remain fixed, so to balance the books the concept of a share premium is introduced. The share premium is just a book entry to make up the difference between the par value and the actual value. The following equation is used to determine the values: Par Value Share + Share Premium = Actual Share Value.A non-par value share is the opposite of a Par value share meaning the share price can fluctuate making a non-par value share the same as the actual value of the share. 

No, shares can be retained in the company for issue at a later date. 

Yes, all companies should have a company register to record all the past and present shareholders information including the information on issuing, transferring and allotting shares.