The loss of a share certificate is a stressful situation for investors because it means that they have lost a certificate that is important for shareholders and serves as evidence of their equity stake in a particular company. For one reason or another, a share certificate may be misplaced, stolen, or destroyed, and the loss thereof should be addressed promptly to safeguard an individual’s financial investment and to maintain the soundness of the share certificates. While digital and dematerialized shares have become more popular, share certificates remain valuable for long-term investors or businessmen possessing shares in companies established many years ago. In this article, the consequences of losing a share certificate, procedures to mitigate and deal with it, and how to prevent the occurrence of such an event in the future are discussed.
What is the Loss of a Share Certificate?
A lost share certificate refers to the situation whereby a physical document that proves entitlement to a given number of shares in a company is missing due to one or many causes of ignorance, theft, or any other related cause. Attendance certificates act as evidence to its holder or an investor, showing the number of shares owned and the certificate number, among other things. This is a loss of a number of things, as this document, in one way or another, can be transferred or sold to another individual outside the ownership, or it may be hard to acquire the legal tender that would prove that one owns a certain parcel of company shares, or one may face problems undertaking some transactions whereby one needs some documents or even dividends.
The Impact and Consequences of Losing a Share Certificate
The loss of a share certificate can be a massive blow to a holder, especially in terms of exercising effective management over shares. Since the certificate is transferable, it becomes difficult to sell or transfer shares, as the physical document is often needed when undertaking such transactions. Further, shareholders can encounter difficulties in obtaining dividends or asserting rights such as the right to receive dividends, be informed of a meeting of shareholders, or vote on the company’s management.
In addition, there is substantial reporting work as well as efforts to rectify the amount lost. The formalities that are involved in the filing of the duplicate certificate entail submission of a formal report to the company, executing an indemnity bond, and may also involve publishing the public notice in the newspapers to avoid fraudsters from taking advantage.
How to Manage the Loss of a Share Certificate?
Managing the loss of a share certificate involves several critical steps to ensure the security of your investment and to restore your ownership records. Here is a detailed guide on how to handle this situation effectively:
Report the Loss Immediately
One is supposed to report the loss of the share certificate when they come to this realisation to the company or the RTA. It assists in minimising prepaid toll transactions that may involve fraud. In fact, many organisations have dedicated personnel or offices to deal with such matters, although this may vary between organizations. Please complete the details you’re to fill and include the name of the holder, address, certificate number, and number of shares.
Prepare an Affidavit
From time to time, an affidavit stating that the share certificate has been lost may be required or demanded. This legal document should briefly describe the circumstances under which the certificate was lost and provide assurance that the person filling out the form is the legal owner of the certificate. The affidavit must be notarized to check the validity of the affidavit, as the statement is claimed to be true.
Publish a Notice
Some organisations may ask you to place a notice in the local or national newspaper indicating that you have lost the said share certificate. This step is taken to give a hint to society and also to avoid the perpetration of any fraudulent activities. The notice usually includes details regarding the lost certificate and encourages anybody who has this information to contact the authorities.
Provide an Indemnity Bond
An indemnity bond is an essential bond that safeguards the company in the event of the loss of the certificate, since liability may arise from the loss. This bond, in effect, operates as an insurance policy where you agree to compensate the company in case of any losses or damages incurred from the issuance of a duplicate certificate.
Apply for a Duplicate Certificate
After fulfilling the formalities of affirming the loss of your share certificate, one is able to apply for another copy of the share certificate. The process of applying for the certificate is generally different from company to company, but in most cases, the applicant is expected to submit the police report, affidavit, an indemnity bond, and any other documents that may be considered necessary.
Steps to Safeguard Your Share Certificates
Safeguard your investments by taking preventative measures with your share certificates.Take some precautions with your share certificates to prevent loss. To bring these papers into digital form, transfer them to a dematerialization account. Do a records audit to find out the certificates that may be missing in the portfolio. This begs for restraining access to these storage solutions. If you are involved in an accident, keep copies of these documents in another area besides photocopying or scanning them. With these best practices in mind, you will be able to significantly reduce the chances of a certificate getting lost or damaged and the inconvenience involved in having to do so.
Final thoughts
If you find yourself in a situation where you have to face the loss of a share certificate, then know that it can be a very stressful ordeal, but you should know that this is not the end of the world as you can easily handle the situation with the aid of some practical approaches. It is crucial to report the loss immediately, fill out all the relevant paperwork, and apply for a duplicate certificate so that you can easily bring back the ownership record and continue with its investment-related activities without much hindrance. On the same note, practicing more effective measures like holding demat accounts and secure storage is likely to protect your share certificates from further loss in the future. Incidentally, if you ever lose a share certificate and require professional help, Shares Recover is always ready to provide help and advice to ensure that you do not encounter any complications along the way.
FAQs
1. What happens if I lose my share certificate?
Misplacement of a share certificate hinders shareholders from trading it, the sale of the shares, any dividend payments, or voting in the shareholders’ meeting. You may have to alert the company that the item is lost and may need to be replaced by a second certificate.
2. What steps should I take if I lose my share certificate?
The initial procedure regarding this provision is to notify the issuing company of the missing shares. There may also be circumstances that require attaching an affidavit and/or publishing a public notice, as well as furnishing an indemnity bond. Last of all, apply for a duplicate certificate, as explained in the next section.
3. How can I prevent losing my share certificates?
It may also be useful to physically store your shares by transferring them into a demat account that you hold for paperless storage. Conduct monthly audits to ensure that all records are in order, and keep all your certificates safely in a safety deposit box or in a home safe. Instead, keep a copy of certificates in the form of photocopies or digital scans for use in cases of loss or damage.
4. What is an indemnity bond, and why is it required?
In particular, it guards the company against any possible risks in the event that somebody else attempts to use the lost certificate. It is basically a promise that you will be liable to the company for any harm caused by the issuance of a duplicate.
5. Can I get help with replacing a lost share certificate?
Indeed, there are outsourcing services like Shares Recover that can give you a helping hand with that. They shall be helpful and accountable for ensuring that you undergo the right processes as required in the reissuance of a duplicate certificate.
Posted by Web Digitalize
