Stock Ledger and Stock Certificates

Authorized, issued and outstanding shares

A corporation can never issue more shares than are authorized. To issue more, the articles must be amended and refiled.

Par value basics

Par value is a nominal minimum value assigned to shares in the articles. Many corporations choose a very low par value or no par value where the state allows. Par value is generally not the market value of the shares. It can affect how the consideration for shares is accounted for, and in some states it affects franchise tax calculations — see our state notes.

The stock issuance resolution

Shares are issued when the board adopts a resolution authorizing the issuance, typically in the initial organizational minutes for founders. The resolution generally names the recipient, the number and class of shares and the consideration — cash, property or other value as permitted under state law — and states the board's determination that the consideration is adequate.

What a stock ledger records

The stock ledger (also called a share register or stock transfer ledger) is a chronological record. Each entry typically includes:

The ledger is one of the records many corporations keep permanently. It is also what you consult to identify shareholders entitled to vote on a record date.

Issue shares correctly from day one

A board-approved stock issuance resolution is the starting point for an accurate ledger.

Certificated vs. uncertificated shares

Traditionally, each issuance was represented by a printed stock certificate signed by officers. Many states now allow uncertificated shares — ownership recorded only on the corporation's books — if the bylaws or a board resolution provide for them. Holders of uncertificated shares may be entitled to a written statement with certain information.

Transfer restriction legends

Shares in a closely held corporation are usually subject to restrictions — under securities laws, a shareholder agreement or the bylaws. A legend is a statement on the certificate (or in the notice for uncertificated shares) that tells holders and transferees that restrictions apply. Restrictions are generally more enforceable against a transferee who had notice of them.

Lost certificates

Bylaws commonly let the board issue a replacement for a lost, stolen or destroyed certificate, often requiring an affidavit of loss and sometimes an indemnity. Record the cancellation of the original and the issuance of the replacement in the ledger.

Keeping the cap table and ledger consistent

• Update the ledger the same day any issuance or transfer is approved.
• Reconcile the cap table spreadsheet against the ledger at least annually.
• Make sure every entry ties back to a board resolution.
• Store the ledger with your corporate records book.

Recording a share transfer

When a shareholder sells or gifts shares, the corporation's records must reflect the change. A typical process:

1. Check transfer restrictions in the bylaws and any shareholder agreement, including rights of first refusal.
2. Obtain any required board or shareholder approvals.
3. Receive the signed transfer instrument and, if certificated, the surrendered certificate.
4. Cancel the old certificate and issue a new one (or update uncertificated records).
5. Enter the transfer in the ledger with date, parties and shares.