What Does a Proper Share Certificate Look Like?
December 8, 2017 2:44 AM   Subscribe

This question relates to a company registered in the US. They're paying me in a mixture of cash and shares. Now it's time for them to officially sign the shares over to me — what information should the "share certificate" contain?

I want to make sure that I get a proper, legal share certificate, not just a piece of paper that looks right but ends up being useless. What information needs to be on the certificate to make it "correct"?

The plan is for the CEO to meet me and sign a document allocating my shares to me. No lawyers or notaries will be present. Is this normal?

As you can tell, I don't know anything about this. Explain it to me in small words please.
posted by ZipRibbons to Work & Money (9 answers total)
 
Are they a listed company?
posted by pharm at 3:38 AM on December 8, 2017


I don't think they're listed. They are an Inc. And this will be "common stock".
posted by ZipRibbons at 3:40 AM on December 8, 2017


If you are concerned that the company is going to give you a fake cert and ultimately stiff you on the shares, perhaps you should reconsider the decision to work for them. Having said that, I would be more concerned with getting a copy of the minutes of a board of directors meeting where they voted to give you the shares or the authorization for the CEO to make the decision and the fact that he did make the decision. The certificate itself can be lost or destroyed, but the corporate records should be the backup.

If there is no transfer company involved, get a written statement from the CEO that he is authorized to allocate you the shares, the number of shares he is allocating you and any vesting provisions or restrictions on the shares.
posted by AugustWest at 5:27 AM on December 8, 2017 [3 favorites]


If a listed company, they probably have a share registrar. The paper is just paper, the important bit is the register, maintained by a third party registrar. If not a listed company, consult your accountant or lawyer. You have and an accountant and lawyer, right?

(This is general advice, and not legal or financial advice)
posted by pompomtom at 5:55 AM on December 8, 2017 [1 favorite]


First - why do you suspect that they might give you a false certificate?

If you google "U.S. share certificate" or "share certificate template" you'll get some ideas. Note that there's a lot of variety. This might be helpful.

I'd look for the (correct and full) name of the company, the number of shares and your name, signature/s by a person/s with the authority to transfer the shares to you, and date. August West and pompomtom make a good points about the meeting minutes and registry.

If you have a reason to suspect that they might give you a false certificate then just don't work for them. Research their backgrounds if you're uncomfortable and see if they've stiffed other people in the past or if their backgrounds don't line up with this project. But even if you find nothing and your gut is off, just don't work for them. If they are shysters, knowing everything that should be on a legit share certificate and getting all the right docs is not going to save your bacon.
posted by bunderful at 5:59 AM on December 8, 2017


This sounds like most lawyer-y question that ever lawyer-ed. Seriously. The title of your question is "What Does a Proper Share Certificate Look Like?", which frankly sounds like the type of thing that would be on a test in law school (are there tests in law school?!). It's a cliche to answer a question on Ask with either "lawyer" or "therapy," but this just seems right down the middle of the plate when it comes to a lawyer's expertise.
posted by Betelgeuse at 6:30 AM on December 8, 2017 [1 favorite]


At least in the tech world, it is very rare for a company to have actual paper stock certificates. IIRC Google never had them all the way up to its IPO. They are ornate documents of a past era. In the US, modern tech companies pre-IPO manage their shares with their law firm and accountancy. Or if you're lucky, with a service like Equiserve (now Computershare), eShares, or a bank like UBS. What you should expect is a letter from their lawyer documenting your share ownership. I've never seen one notarized; in every engagement I've been paid in stock I got a simple letter signed by the CEO. Or even just an email. (Sloppy, but it worked out.)

If you think they're trying to cheat you, you need a lawyer now. If you trust them you should still verify. I wouldn't worry too much about the transfer being correct now, assuming you trust them. But you said you don't know much about this topic, no reason you would! If you think the shares may be valuable you should have an accountant or attorney review the documents with you. It will cost a few hundred to a thousand dollars.

Where things go wrong is years down the road. It's very common for small shareholders to be forgotten or get lost in the paperwork. See this 2015 article on Broken Cap Tables for examples. When I've owned private stock I've made a point of emailing the company's lawyer or accountant every couple of years just to verify my ownership is correct, particularly after events like share splits or funding rounds. In theory the company has obligations to shareholders to notify them of things; in practice it's often forgotten for small shareholders.
posted by Nelson at 7:11 AM on December 8, 2017


You say "I don't think they're listed. They are an Inc. And this will be "common stock"."
None of these things are like the other.
A company can be incorporated, but not listed on any stock exchange - that is, it's shares are 'privately held' and not traded in any way.
Shares in a company are (very generally) divided into common and preferred shares, with preferred shares having more 'privileges', such as being worth more, not being degraded in merger (sometimes!), etc.
Since you are being 'paid' in shares, it's worth your while to find out if this company is publicly traded (listed). If it is not, you are being paid with very iffy equity in the company. This tactic was used a lot in the dot-com bubble - "we'll give you 10,000 shares!" and people got excited because of IPO millionaires - but in reality, it was an excuse to under-pay, and most of those companies went down the tubes, their 'shares' with them.
If your company is listed, they will likely provide you with an account at a brokerage, where you can track vesting (how much of you actually own - your shares will likely vest over time), price, and (when vested) trade (sell).
This discussion on Bogleheads might help, or you may need to start at something more basic.
Oh, and share certificates are indeed an artifact of an earlier age - you need to know if they are actually worth anything on the market (i.e. sellable).
posted by dbmcd at 10:59 AM on December 8, 2017


Thanks everyone. Nothing shady going on here, just total ignorance on my part. I got the certificate on Friday and it looks like something from 1893, but seems to cover all the necessary bases.
posted by ZipRibbons at 7:14 AM on December 11, 2017


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