Stock certificate requirements for a Delaware corporation

Certificated or uncertificated, Delaware's choice (§ 158)

Delaware General Corporation Law § 158 is one of the most permissive stock-certificate provisions in the US. Every Delaware corporation may issue:

• Certificated stock, represented by physical or digital certificates issued to stockholders
• Uncertificated stock, recorded in the stock ledger without any certificate, with written notice of issuance to the holder
• A combination, different share classes may be certificated or uncertificated; some classes may even be partly certificated and partly uncertificated

The choice is set in the corporation's certificate of incorporation, bylaws, or by board resolution. Many newer Delaware corporations issue only uncertificated stock to reduce administrative overhead. The certificate is not the share; § 159 confirms that the share itself is personal property of the holder regardless of whether a certificate is issued.

Certificate content and signing

Where stock is certificated, § 158 requires the certificate to be signed by two officers of the corporation. The combinations permitted include:

• Chairperson or vice-chairperson of the board, plus the president or a vice-president
• Treasurer or an assistant treasurer
• Secretary or an assistant secretary

Practical convention is one signature from the president (or CEO) and one from the secretary. Facsimile signatures are permitted, and many Delaware corporations issue certificates with printed officer signatures and the corporate seal. The certificate must state on its face the corporation's name, the class and series of shares, and the par value (or a no-par-value statement).

Transfer restrictions under § 202

Delaware § 202 governs restrictions on transfer of securities. A restriction is enforceable against a transferee with notice. To establish notice, the restriction must be:

• Conspicuously noted on the face of the certificate (for certificated stock), OR
• Contained in a notice delivered to the holder of uncertificated stock at the time of original issuance and on any subsequent inquiry

Common restrictions include rights of first refusal, right of first offer, drag-along and tag-along provisions, and securities-law hold-period legends. Most Delaware private corporations have multiple restrictions stacked on each certificate.

Transfer mechanics

Delaware stock transfers are governed by Article 8 of the Uniform Commercial Code (adopted as part of Delaware law). For certificated stock, the holder endorses the certificate (or signs a separate stock power) and delivers it to the transferee. For uncertificated stock, the transfer is effected by instruction to the corporation or its transfer agent. In each case, the corporation cancels the prior record and creates a new record in the stock ledger to reflect the transferee as the new holder.

For private corporation transfers, board approval and satisfaction of any ROFR/tag-along provisions are typically required before the transfer is recorded. The transfer is not complete in the eyes of the corporation until the stock ledger is updated.