One fine morning in the middle of the Precession of the Equinoxes, a reader asked me a new fine question that he had never asked before. He asked, "What date should be placed on a stock certificate?"
A preliminary question might be why date a stock certificate at all? Corporations Code Section 416(a) entitles every holder of shares to a certificate (this post is about shares that are certificated securities (Corp. Code § 156.1), uncertificated securities (Corp. Code § 191.1 and Comm. Code § 8102(a)(18) is a subject for another post). The share certificate must be signed in the name of the corporation by any one of the chairman or vice chairman of the board, or the president or a vice president and also by any one of the chief financial officer or an assistant treasurer, or the secretary or any assistant secretary. There is no mention of a date in the statute. Corporation Section 417 prescribes some additional matters that must appear "on the certificate" (Corp. Code § 174) when the corporation's shares are classified. Again, the statute makes no mention of a date. Corporations Code Section 418 further requires that to the extent applicable the following statements must appear on the certificate:
- The fact that the shares are subject to restrictions upon transfer.
- If the shares are assessable or are not fully paid, a statement that they are assessable or the statements required by subdivision (d) of Section 409 if they are not fully paid.
- The fact that the shares are subject to a voting agreement under subdivision (a) of Section 706 or an irrevocable proxy under subdivision (e) of Section 705 or restrictions upon voting rights contractually imposed by the corporation.
- The fact that the shares are redeemable.
- The fact that the shares are convertible and the period for conversion.
Again, the statute makes no mention of a date.
In the absence of any provision of the General Corporation Law requiring a date, what date goes on a share certificate? A likely answer is the date on which the shares are issued. This, however, leads to another question - what is the date of issuance? The General Corporation Law refers to the issuance of shares (see, e.g., Section 301.5) but does not define when shares are issued. In People v. Beber, 104 Cal. App. 2d 359, 367-68 (1951), the Court of Appeal held:
The issuance of shares of stock of a corporation means the act or contract of the corporation by which shares become vested in a person as a member or stockholder. (Blythe v. Doheny, 73 F.2d 799, 803; approved in Domestic & Foreign Pet. Co., Ltd. v. Long, 4 Cal.2d 547, 554 [51 P.2d 73].) The time when a share of stock originally comes into existence, and is deemed issued, is controlled by the intent of the parties and is ascertained by examining the contract which they have executed concerning such issue. (See Robbins v. Pacific Eastern Corp., 8 Cal.2d 241, 269-70, 274-75 [65 P.2d 42]; Hertz Drivurself Stations v. Ritter (C.C.A., 9th Circ.), 91 F.2d 539, 541.)
This case, however, was decided under the former Corporate Securities Act and before the enactment of the General Corporation Law. Moreover, the focus of the current Corporate Securities Law is on where and when an offer or sale of a security occurs, not the technicalities of when a certificate is issued.