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A fresh share certificate goes along with many pivotal moments in your startup’s life – whether you’re building out the founding team, closing a funding round with investors or securing a new team member to drive the next stage of growth.
Let’s dive in to discover what a share certificate means in legal terms, how to create one and what to do with it.
A share certificate is a legal document that proves ownership of shares in a company. It specifies details such as the shareholder name(s), number and type of shares owned, the nominal value of the shares, and the date they were issued.
It’s your company’s responsibility to create and issue the share certificates to the shareholder, within two months of allotting the shares.
The simple answer is that you need to give your shareholders share certificates because part 21 of the Companies Act 2006 says so.
In many ways, share certificates are a relic of a pre-digital age, when recordkeeping relied on a trail of physical paper. With digital cap tables and shareholder registers you could argue that the share certificate is outdated.
Nevertheless, share certificates are an important part of making sure that from the start, your company’s ownership structure is set up correctly and in a scalable way.
If you don’t issue share certificates on time after new shares are allotted, you could face financial penalties. Any unsolved or unclear issues around equity could also cause problems in further funding rounds. When potential investors are doing their due diligence, you don’t want any confusion about who owns what.
✅ Issue, transfer and split shares
✅ Create, send and sign share certificates
✅ Manage your equity on auto-updating cap table
✅ Store all documents securely in your data room
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Whatever format or template you use, here’s the list of information your share certificate needs to display:
You don’t need to issue your shareholder an individual certificate per share, just per share class.
Here’s what the digital share certificates you generate on SeedLegals look like 👇
Founders often ask us: why does the certificate note the nominal value and not the price the investor actually paid?
Shares have two values: the nominal value and the current market value.
The nominal value is the minimum price a share can have, which is used for accounting purposes and to keep track of who owns what percentage of the company.
The current market value at the time of your funding round is recorded on the SH01 you must file with Companies House. The SH01 is the source of truth that records both the nominal value and the price paid per share at the time of the transaction. So you don’t need to worry that the share certificate doesn’t record the price paid – the nominal value is what should appear on the certificate.
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Two company directors need to sign. If your company doesn’t have two directors, you can have either the company secretary or a witness sign instead.
Under Companies Act 2006, you have two months from the time that you allot the shares to issue the share certificates.
The clock on that two month deadline starts ticking from the date the board and shareholders approved the allocation of the shares.
Share certificates don’t have an expiry date. After it’s issued, a share certificate remains valid until the shareholder named on it sells or transfers the shares. The certificate would then be cancelled and a new one issued to the person the shares were transferred to.
Sending out share certificates to your shareholders is just one part of the process of issuing shares. You also need to:
If that looks like a lot of things to keep track of, don’t worry. On SeedLegals, these tasks are automated so it’s easy to follow the process – and there’s friendly, expert help whenever you need it.
Whether you’re planning a funding round, working out how to share equity with your employees or looking for a one-stop solution to manage your board and cap table, we’re here to help at SeedLegals.
Book a slot below for a free chat with our friendly team to find out more.