Share certificates are important documents. It can cause major problems if shareholders have lost their share certificates or dealt with them improperly.
What should a company do when a shareholder says that they have lost their 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. In addition, it must also state 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 they will return the lost certificate to the company if they find 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. Though it may be workable in the case of shares in companies quoted on the ASX, 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? Are you facing a situation involving a lost share certificate now? Call us on (02) 9199 8597 or email us.
The information contained in this post is current at the date of editing – 27 August 2024.