A stock certificate is a written and signed document that represents a stockholder’s shares of stock in a corporation. It contains the following information: the date of issuance, the number of shared owned, and an identification number, among others.
A stock certificate is physical proof of ownership and is signed by officers of the corporation. These certificates normally have corporate seals and an intricate design to discourage false duplicates.
But what happens when a stock certificate is lost, stolen, or destroyed? The stockholder or corporation cannot simply issue a new one.
Section 73 of The Corporation Code of the Philippines lays down the procedures for issuing new stock certificates.
Affidavit of loss
The registered owner of the stock certificate or their legal representative shall file three copies of an affidavit of loss with the corporation. The affidavit should contain the following:
- Circumstances detailing how, when, and where the certificates were lost
- Number of shares represented by each certificate
- Serial numbers of the certificates
- The name of the corporation
Other helpful information or evidence may be submitted.
Publication of notice
Once the affidavit and related information have been verified with the books of the corporation, the said corporation shall then prepare a notice on the lost, stolen, or damaged stock certificate.
The notice should state the following:
- Name of the corporation
- Name of the registered owner
- Serial numbers of the certificates
- Number of shares represented by each certificate
The notice should be published in a newspaper of general circulation where the corporation’s principal office is located. It has to be published once a week for three (3) consecutive weeks at the expense of the registered owner of the stock certificate.
Issuance of new certificate
If no contest has been presented after one (1) year from the date of the last publication of the notice, the corporation can cancel the lost, stolen, or damaged certificate from its books and a replacement stock certificate can be issued. All rights to future contentions shall also be barred.
Should the registered owner file a bond or other security, the new certificate may be issued even before the one (1) year period has lapsed. The bond or security is effective for one (1) year and the particulars such as the amount and form should be satisfactory to the board of directors.
Contention
The issuance of a new stock certificate shall be put on hold if a contest has been presented to the corporation or if an action is pending in court regarding the stock certificate in question. This suspension will only be lifted once the court makes its final decision regarding the said stock certificate.
Exceptions
If the corporation follows the necessary steps in issuing replacement stock certificates, then no action can be brought against them. Exceptions to this are cases of fraud, bad faith, or negligence on the part of the corporation and its officers.
For matters related to corporate law, consult with Duran & Duran-Schulze Law. Call them at (+632) 478 5826 or send an email to info@duranschulze.com.