A stock certificate is tangible evidence of the share it represents. A person who wishes to sell his shares of stock would normally be required to deliver the stock certificates to the buyer. A person who wishes to pledge his shares would also be required to deliver the stock certificates to the pledgee.
If the stock certificates are lost, stolen, or destroyed, the corporation cannot simply issue new stock certificates in the name of the stockholder. The Corporation Code provides the procedure for the replacement of a lost, stolen, or destroyed stock certificate. These are:
(1) The registered owner of the lost stock certificate (or his duly authorized representative) must file with the corporation an affidavit of loss. The affidavit of loss must be executed in triplicate and must set forth the following: (a) the circumstances as to how the certificate was lost; (b) the number of shares represented by the certificate; (c) the serial number of the certificate; and (d) the name of the issuing corporation. He must also submit such other information and evidence which he may deem necessary.
(2) After verifying the affidavit and other information and evidence with the books of the corporation, the corporation must publish, at the expense of the stockholder, a notice in a newspaper of general circulation in the place where the corporation has its principal office, once a week for three consecutive weeks. The notice shall must state the following: (a) the name of the corporation; (b) the name of the registered owner; (c) the serial number of the lost certificate; (d) the number of shares represented by such certificate; and (e) that after the expiration of one year from the date of the last publication, if no contest has been presented to the corporation regarding the certificate of stock, the right to make such contest shall be barred and the corporation shall cancel in its books the certificate of stock which has been lost, stolen or destroyed and issue in lieu thereof new certificate of stock, unless the registered owner files a bond or other security in lieu thereof as may be required, effective for a period of one year, for such amount and in such form and with such sureties as may be satisfactory to the board of directors, in which case a new certificate may be issued even before the expiration of the one year period.
(3) After a period of one year from the date of last publication, the corporation can cancel in its books the lost certificate and issue a new stock certificate if no contest was presented to the corporation regarding the lost certificate. The corporation can also issue the replacement stock certificates prior to the lapse of the one year period if the owner files a bond or other security satisfactory to the board of directors.
(4) If a contest has been presented to the corporation or if an action is pending in court regarding the ownership of said certificate of stock which has been lost, stolen or destroyed, the issuance of the new certificate of stock will be suspended until the final decision by the court regarding the ownership of said certificate of stock which has been lost, stolen or destroyed.
If the corporation observes the foregoing procedure, no action can be brought against the corporation which issued the replacement stock certificates (except in case of fraud, bad faith, or negligence on the part of the corporation and its officers).
(Note: This is part of a series of “How To” articles. These articles intend to give the reader a general overview of the legal aspects of doing certain things and they will not contain all details regarding the proposed action. There may be changes to applicable laws and regulations after the article is posted. You should consult your lawyer if you wish to take a particular action. See Disclaimer page for additional disclaimers.)