Stock Certificate Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Stock Certificate, written in plain English, along with examples of how it is used.

What is Stock Certificate?

(n) Stock certificate is the document issued by a body incorporated to the person who is holding shares in the company which has been converted in to stock, containing information about the corporation, about the shares held by such person, name of the person, date of issue and other information required by the law in force.

History and Meaning of Stock Certificate

A stock certificate is a physical document that represents ownership in a company. It is a legal proof that the holder is entitled to a portion of the company’s assets and earnings. Stock certificates date back to the 1600s when the Dutch East India Company issued them to their shareholders. Since then, they became a standard practice for companies to issue to shareholders.

Over time, the issuance of stock certificates became more sophisticated, and their design and format evolved. Today, while many companies issue digital or electronic shares, some still issue paper stock certificates. The formality of the document helps to give shareholders confidence in the company.

Examples of Stock Certificate

  1. John has received a stock certificate for the 100 shares he owns in ABC Corp.
  2. Sarah proudly displays her stock certificate for XYZ Inc.’s 5,000 shares on her office wall.
  3. Tom inherited a stock certificate from his grandfather for a company that no longer exists.

Legal Terms Similar to Stock Certificate

  1. Shareholders: An individual, company or organization that holds stock in a corporation.
  2. Stock Options: A type of derivative security that gives the holder the right, but not the obligation, to buy or sell a stock at a specific price for a specific date.
  3. Stock Split: A process by which a company increases the number of outstanding shares by dividing each share, which lowers the price per share without changing the total value of the shares.