A share certificate that has been signed on behalf of the firm is required if you wish to demonstrate that you are the legitimate owner of a specific number of shares in a company. Share certificates are another name for the documents that prove ownership of stock shares.
In this article, we examine share certificates’ application in Nigeria and weigh their benefits and drawbacks.
Shares certificates explained for Nigeria Revealed (2026):
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An overview of share certificates
A certificate proving ownership in the business is given to investors who buy newly issued shares of stock. A receipt for the acquisition and ownership of shares in the corporation is effectively provided by the share certificate.
This document establishes the holder’s registered ownership of the shares from the specified date forward.
Traditional dividend claims used to be supported by the presentation of a stock certificate. Upon each presentation, the reverse of the certificate had the dividend payment receipt stamped on it. By employing this technique, all dividend payment documentation might be gathered in a single location.
Today, companies must deliver a certificate representing such shares within two months after the issuing or transfer of such shares. A corporation may provide a single certificate for all shares issued or transferred at a particular time, unless a shareholder requests a different certificate.
By executing a proxy, a stockholder may on occasion designate another person to vote in his or her place.
Even if they don’t have actual certificates, shareholders can still designate proxies to cast their votes during shareholder meetings. The rules for voting are set down in the company’s charter and corporate law.
You can ask for a replacement share certificate for the same number of shares if your old one has been lost, stolen, or irreparably destroyed. In this case, before a replacement can be provided, the shareholder must return the damaged original to the company.
Currently, the shareholder may request one or many certificates, depending on their needs.
Share certificates in Nigeria
Shares are the foundation of the connection between a corporation and its shareholders and relate to the proprietary interest that shareholders have in a firm.
This interest is significant since it is the means by which its holders join a corporation, making the issuance of a share certificate bearing the company’s common seal to shareholders sufficient to establish the members’ ownership of the shares.
However, due to technical advancements and a widespread preference for electronic systems for recognizing share ownership, this paper-based system is quickly becoming outdated in Nigeria.
The most common way for an intending shareholder to enter into a contract with a corporation is to apply to the company for an allocation of a specific number of shares, and then the company will make the allotment and notify the shareholder, essentially triggering section 125 of the Act’s provisions.
If the application is fully or partially accepted by the firm, the applicant will get an allocation, and within 42 days of the allocation, he will be notified of the allocation and the number of shares that were allocated to him (s.125(c)).
The allottee becomes a member of the company upon entry of the name in the company register. Additionally, every company must issue a certificate of shares allocated or transferred to the allottee or transferee, as applicable, in accordance with section 146(1) of the Act.
Share certificates grant proprietary rights to the holder and can be sold or transferred by the shareholder, just like any other item of personal property.
A share certificate, like membership registration, is just prima facie evidence (s. 147) and not a title document since, in the event of a discrepancy, the register of members is a better prima facie evidence source than the former in terms of proving the company’s ownership and membership.
Why paper-based share certificates might become redundant in Nigeria
In Nigeria, the issuance of physical paper certificates is no longer necessary thanks to the Central Securities Clearing System (CSCS), which was launched by the Securities and Exchange Commission (SEC) in collaboration with the Nigerian Stock Exchange.
This is particularly true for businesses whose shares are traded on the Stock Exchange because the CSCS incorporates a Central Securities Depository for the share certificates of listed securities and a sub-registry for all listed securities.
When a shareholder opens a CSCS account, their information is taken and entered into an electronic register along with the corresponding number of securities that are electronically credited to the CSCS depository.
The physical paper share certificates that were previously issued have been replaced by an electronic statement that shows the shareholder’s shareholding and its current value. The dematerialization process, often known as paperless trade, enables electronic transaction execution.
That said, the Act mandates that the certificate be issued under the company’s common seal, even if the Certificate’s form is controlled by the Articles of the Company (s.146) (3). The Act essentially only accepts actual paper certificates.
Even so, the majority of businesses, especially those that are publicly traded, don’t really issue share certificates; instead, they instruct recipients to register CSCS accounts so that their ownership stakes can be recorded there.
Despite the fact that the shareholder or investor may request real share certificates (section 146(5) gives the shareholder the right to seek remedy in court when the firm fails to issue physical share certificates), the conduct of these companies effectively violates the Act’s provisions.
Benefits of share certificates
Share certificates have advantages and disadvantages. If you have a sizable sum of money, are interested in investing, and want to make sizable dividends, some suggest stock certificates (the amount your firm provides to shareholders from its monthly earnings).
A certificate of deposit account and a stock certificate account are equivalent in terms of investment (CD). However, it is a credit union, not a bank, that issues it.
Stock ownership certificates are a great way to invest and grow your wealth by accumulating dividends. You won’t be able to retrieve your money without paying a fee, unlike other options, but you should make more money in interest. Here are some other benefits:
– Adjustable terms: Consistent returns on investment are guaranteed. Financial planning is made simpler by being aware of how quickly your account balance increases.
– Long-term profit: Stock certificates among the various savings products provide considerable returns while continuing to be a reliable investment choice over time. Select the strategy for which the improved revenue will outweigh the added time commitment.
High ROI: The annual rate of return on a stock certificate represents the prospective dividend or profit. The period over which compound interest will be computed or the time at which your account will be credited with income is included in this interest rate. Rates may be set by financial cooperatives annually, quarterly, monthly, or even daily.
– Higher profit: Since certificate holders have less access to their money than holders of traditional savings accounts, certificates are more valuable to banks. Thus, the interest rate of the certificate is more important than the interest rate of a standard savings account. This could increase your return on investment.
Drawbacks of share certificates
There are several disadvantages to the issue of share certificates.
The biggest investment in money and time for the company is highlighted. Physical stock certificates must be produced, which takes a lot of time and money. In fact, the majority of businesses want a whole department dedicated to handling share certificates.
A stock certificate system requires a lot of time-consuming documentation for maintenance. Any transaction, including a merger or spinoff, must be signed and handed to the company before it can be completed. Additionally, managing compliance becomes much more difficult.
Keeping track of ownership is also extremely difficult because shareholders may transfer certificates to third parties without telling the company. Confirming identities and securing signatures are necessary steps in the administrative process for the ownership transfer.
In other words, the ownership of the shares must be continuously tracked by the corporation. Usually, a computer is utilized for this.
Last but not least, the organization will have a lot more work to do if a shareholder possesses a paper certificate and it is lost or stolen. The company must first identify the old paper certificates, verify ownership, place a “stop” on the old certificates, and then issue the new certificates.
During this process, the shareholder will undoubtedly encounter some level of annoyance as well.
In conclusion, it is very challenging to track and record deals involving paper stocks and to confirm their legitimacy.
Conclusion
A share certificate is a document that is signed on behalf of a corporation and attests to the ownership of a specific number of shares in that firm. Stock certificates are another name for ownership certificates.
Both the company charter and business legislation specify voting rights. A new stock certificate will be given for the same number of shares in the event that the original stock certificate is lost, stolen, or destroyed.
If this occurs, shareholders are required to return the torn copy to the company before issuing a new one. Additionally, stockholders have until now to exercise their choice to issue a single or separate certificate.
The voting power is larger for shareholders who hold the share certificates in their possession. In a similar vein, stockholders without a certificate would be permitted to cast a ballot for shares belonging to others.
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