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Concept
Stock certificate
Summary
In corporate law, a stock certificate (also known as certificate of stock or share certificate) is a legal document that certifies the legal interest (a bundle of several legal rights) of ownership of a specific number of shares (or, under Article 8 of the Uniform Commercial Code, a securities entitlement or pro rata share of a fungible bulk) or stock in a corporation.
A stock certificate is a legal document that certifies the legal interest (a bundle of several legal rights) of ownership of a specific number of shares (or, under Article 8 of the Uniform Commercial Code, a securities entitlement or pro rata share of a fungible bulk) or stock in a corporation. The first such instruments were used in the Netherlands by 1606, and in the United States by the year 1800. Historically, certificates may have been required to evidence entitlement to dividends, with a receipt for the payment being endorsed on the back; and the original certificate may have been required to be provided to effect the transfer of the shareholding.
In the United States (to a limited extent) and other countries, electronic registration is supplanting the stock certificate for beneficial owners (though depositories holding for them may themselves hold certificates), with companies at times no longer being required to issue paper certificates. In the United States over 420 of the 7,000-plus publicly traded securities, 6%, do not issue paper certificates to beneficial owners. Volumes of share transfer on the New York Stock Exchange, for example, increased over time; in 1938 daily volume was 1 million shares, and in 1954 it reached 2 million shares. The United States' central securities depository, DTC, in 2011 held 1.6 million paper stock certificates, and has promoted efforts to eliminate paper stock certificates, a process called dematerialization—which has been a goal in the industry since at least the 1960s. In 2012, water from Hurricane Sandy flooded a vault at the DTC, damaging over $1 billion in stock and bond certificates.
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