How Does a Stock Certificate Work?
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A stock certificate is an official, legal document that certifies that the holder owns a certain number of shares in a corporation. A stock certificate will be issued when an investor puts enough money into a given stock to meet any minimum share holding requirements; since huge companies have thousands of private investors, they won't always issue a stock certificate to everyone. Weather a corporation will issue a certificate for buying 1 share or 100 is up for each company to determine.
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There are are essentially two kinds of stock certificates: bearer stock certificates and registered stock certificates. Bearer certificates grant legal ownership of the stock shares to whomever has possession of the certificate itself. While simplistic in theory, in practice bearer certificates are becoming less popular, as they endanger an investment to theft; one certificate could be worth millions of dollars. A registered stock certificate records the actual buyers of the stock shares, making them the preferred certificate in most situations. Even if one were to lose the certificate, the corporation keeps a registry of shareholders.
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Stock certificate holders can attend a company's shareholder meeting. At these meetings, the shareholder can vote with other investors on decisions to be made in the company, such as electing the board of directors, and major changes to the company like mergers, acquisitions, issuing of securities and bankruptcy. Shareholders without a certificate are often not granted the right to participate in these meetings. Sometimes a certificate holder is granted the right to send someone to a shareholder meeting to participate and vote on their behalf.
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