Share certificates are important documents. It can cause major problems if shareholders lost their share certificates or dealt with them improperly.
What should a company do when a shareholder says that he or she has lost his or her share certificate?
Section 1070D(3) of the Corporations Act 2001 (Cth) (Corporations Act) provides that companies must issue a new share certificate if the original share certificate is lost or destroyed. But firstly, the shareholder must do two things:
- The shareholder must give the company a written statement which says that the certificate has been lost, and not pledged, sold or otherwise disposed of. And that proper searches have been made for the lost certificate. It is preferable that this statement be made in the form of a statutory declaration.
- The shareholder must notify the company in writing that he or she will return the lost certificate to the company if he or she finds it.
The Corporations Act also allows companies to request that the shareholder pay a bond amount equal to the market value of the share to indemnify it for any loss it may suffer as a result.
Obviously, it’s unrealistic to ask a shareholder to pay a bond for the market value of the share. It may be workable in the case of shares in companies quoted on the ASX. But it is not reasonable in the context of company title shares which are valued in the hundreds of thousands or millions.
One alternative is to ask the shareholder to enter into a deed poll in which he or she agrees to indemnify the company for any loss resulting from the loss of the certificate.
This can give the company some protection without being so extreme as to require a bond.
Have you ever had to deal with lost share certificates? Share your comments below.