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- For article discussing requirements governing the issuance of share certificates, see 3 Ga. L. Rev. 11 (1968). For article discussing rights granted owners of unpaid and partly paid shares under the Georgia Business Corporation Code, see 3 Ga. L. Rev. 11 (1968).

COMMENT

Source: Model Act, § 6.25. This replaces former § 14-2-87.

Certificateless shares are permitted under subsection (a) upon compliance with Section 14-2-626. There was no comparable provision in former Georgia law. There are no differences in the rights and obligations of shareholders, whether or not their shares are represented by certificates, other than mechanical differences. If share transfer restrictions are imposed, conspicuous references must appear on the certificate if they are to be binding on third persons without knowledge of the restrictions. See Section 14-2-627.

Subsection (a) of the Model Act was amended by replacing the phrase "the rights and obligations of shareholders are identical" with "there shall be no differences in the rights and obligations of shareholders based on" to eliminate any implication that all shareholders' rights are identical, regardless of class or series. Consistent with changes in § 14-2-601, no implication is intended that all holders of shares of the same class will have the same rights, regardless of whether conditions are different with respect to different holders.

Subsection (b) sets forth the minimum requirements for share certificates.

Subsection (c) of the Model Act required detailed descriptions of the relative rights and preferences of each class and series on the certificate, or a statement that the corporation would furnish this information without charge. This is similar to former § 14-2-87(d), requiring that, where there is more than one class or series of shares, the certificate must set forth or summarize such rights or contain a statement offering to furnish them. The Code eliminates this requirement as impracticable and unnecessary, by providing that a reference to the state of incorporation is sufficient, because it places a holder on notice of the location of the provisions governing his rights. Under Section14-2-1602, a shareholder is entitled to inspect and copy the articles of incorporation and all amendments. A complete description of the relative rights and preferences of various classes and securities on a certificate is generally impossible, and a notice that this information can be obtained from the corporation is redundant. All investors in shares are charged with notice that their rights are determined by the articles of incorporation. The Model Act requirements remain a permissible alternative.

Special rules govern disclosure of restrictions on transfer of shares, under Section 14-2-627, and disclosure of statutory close corporation status, under Section 14-2-910. A reference to the state of incorporation is not sufficient notice of these special facts relating to share ownership.

Subsection (d) provides only that certificates must be signed by two officers designated in the bylaws or by the board, a simplification of former law, § 14-2-87(b), which required the signature of specified officials.

Under subsection (d) of the Model Act, all signatures on a share certificate may be facsimiles. This change gives recognition to the fact that a purchaser of publicly traded shares will hardly ever be in a position to determine whether a manual signature on a stock certificate is in fact the authorized signature of an officer of the transfer agent or registrar. From the standpoint of the issuing corporation of publicly traded securities, if a share certificate requiring a manual signature is stolen and the signature thereafter forged, the corporation may defend on lack of genuineness under section 8-202(3) of the Uniform Commercial Code. But this defense is not effective against a bona fide purchaser when the forged signature has been placed on the certificate by an employee of the issuer or registrar or transfer agent entrusted with handling the certificates (UCC § 8-205). Comparable provisions relating to bonds, that preserve the authorization of former law, § 14-2-87(f), are found in Section14-2-150 of the Code.

Subsection (f) is taken from § 14-2-87(e) & (h) of former Georgia law, and is clarifying.

Note to 1989 Amendment The 1989 amendment changed subsection (d) to provide expressly that all signatures on a share certificate may be facsimiles, as the Model Act permits. This eliminated any ambiguity in the prior Georgia law. Comparable provisions relating to bonds, that preserve the authorization of former law, § 14-2-87(f), in Section14-2-150, were also amended in 1989.

Cross-References Certificateless shares, see § 14-2-626. Classes of shares, see §§ 14-2-601 &14-2-602. Close corporations, see § 14-2-910. "Conspicuously" defined, see § 14-2-140. Descriptions of classes, see § 14-2-601. Facsimile signatures on bonds and debentures, see § 14-2-150. Officers, see § 14-2-840. Series of shares, see § 14-2-602. Share transfer restrictions, see § 14-2-627. Signatures, see § 14-2-150.

JUDICIAL DECISIONS

RESEARCH REFERENCES