Stock certificate

Certificated vs. uncertificated stock

Under DGCL § 158 and the Model Business Corporation Act, a corporation's stock may be either certificated or uncertificated. The corporation makes that choice in its bylaws and may issue different classes on different bases. Uncertificated stock is still real stock; the stockholder receives a written notice of issuance instead of a physical certificate.

In practice, many startups and private corporations historically defaulted to paper certificates because that is how their counsel set them up at incorporation. The trend is now toward digital or uncertificated stock, which removes the operational burden of printing, signing, mailing, and storing paper.

What appears on a stock certificate

Statutory minimums vary by state, but a properly issued stock certificate generally carries:

• Certificate number, unique within the corporation's series
• Name of the corporation and state of incorporation
• Name of the stockholder
• Class and series of stock (common, preferred, Series A, etc.)
• Number of shares evidenced by the certificate
• Par value, or a statement of no par value
• Date of issuance
• Signatures of the officers authorized by the bylaws (typically two: the president and the secretary)

Certificates for restricted securities (e.g. shares issued under Rule 144 or pursuant to a securities purchase agreement with transfer restrictions) typically carry an additional restrictive legend on the face or reverse of the certificate.

Certificate versus stock ledger

A stock certificate is evidence of ownership; the stock ledger is the source of truth. DGCL § 219 requires the corporation to maintain a list of stockholders, and where the certificate and the ledger disagree, the ledger controls. Certificates can be lost, replaced, cancelled, or duplicated by mistake; the ledger is the only record the corporation is legally obligated to keep current.

For this reason, every certificate issued, transferred, cancelled, or reissued should leave a corresponding entry in the stock ledger, with the same certificate number visible in both places.

Verification in practice

Paper stock certificates are verified by comparing the certificate in hand to the corporation's stock ledger. That is a private, manual inquiry. Modern digital certificates can carry a QR code that resolves to a corporation-controlled public verification page, which confirms in real time that the certificate is genuine, who it was issued to, and whether it remains outstanding. This matters most during share transfers, secondary sales, and diligence, where the cost of accepting a forged or stale certificate falls on the buyer.