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Lucy, Esq.
Lucy, Esq., Attorney
Category: Business Law
Satisfied Customers: 27621
Experience:  Attorney
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We are a PA-based "C" Corporation. If a

Customer Question

We are a PA-based "C" Corporation. If a shareholder looses their stock-certificate, what is the procedure to replace it?
Submitted: 10 months ago.
Category: Business Law
Expert:  Lucy, Esq. replied 10 months ago.

Hi,

I'm Lucy, and I'd be happy to answer your questions today.

There are three steps for reissuing a lost stock certificate:

  1. The owner who lost the certificate must submit an affidavit, stating that the certificate was lost or stolen, giving all the facts surrounding the loss. This is for the corporations files so they are protected if the someone finds the certificate and tries to sell it.
  2. The owner must purchase a bond to protect the company from loss if someone else presents the stock certificate. The bond is usually 2-3% of the market value of the shares. If you have a small, closely held corporation that isn't traded on the open market, that could be a pretty small amount.
  3. The person who lost the certificate has to ask for a new one before someone else buys it without knowing about the loss. So, for example, if A loses the certificate, he must report it before B finds it and sells it to C, who thinks B owned it rightfully.

If all three of those conditions are filled, you can ask the person who issued the original share certificates to provide a new one. If you have a transfer agent, refer the owner to that person, and they will take care of everything. Asking all owners to make copies of their stock certificates and store them somewhere safe, separate from the originals, can also protect you if something like this happens again, because then you know exactly which stock numbers should be cancelled and not honored.

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Customer: replied 10 months ago.
The share certificate is worth $250,000 to the seller at today's valuation. He only paid $15,000 2-years ago! Some return. Where does he get a Bond from? How does he purchase a Bond? And what happens if he does not have the 2-3% of the share value to pay for the Bond?
Expert:  Lucy, Esq. replied 10 months ago.

Per the S.E.C., you do not have to reissue the share if he cannot pay for a bond to protect you. To get a bond, contact the transfer agent who originally helped issue the certificates. You should have a brokerage firm that can help you with that. if you don't, try contacting a local attorney who works in securities to complete the transaction for you.