Ownership interests in a for-profit corporation must be evidenced by a share certificate, unless otherwise provided by the governing documents of the corporation or by resolution of the board of directors. Sec. 3.021(b) (“The ownership interests in a for-profit corporation, real estate investment trust, or professional corporation must be certificated, except to the extent a governing document of the entity or a resolution adopted by the governing authority of the entity provides that some or all of the classes or series of the ownership interests are uncertificated or that some or all of the ownership interests in any class or series of the ownership interests are uncertificated.”). The share certificate has long been held not to be the share of stock itself, but is “the visible representation of it.” Strange v. Houston & T.C.R. Co., 53 Tex. 162, 169 (1880) (“Although the certificate was not the share of stock itself, it was what the company constituted the visible representation of it; and as between the shareholder and his assignee, the equitable, if not the legal title to the stock, would pass by a transfer of the certificate, and this without it being recorded on the books of the company.”).
It is important to note that “owning stock” does not mean possessing a stock certificate. Texas law has long held that the certificate is not the “stock.” Yeaman, 167 S.W. at 720 (“In a corporation the certificate of stock is not the stock itself”). The certificate is merely evidence of the ownership of the stock. Id. (stating that the share certificate “is but a muniment of title, an evidence of the ownership of the stock.”); Greenspun v. Greenspun, 194 S.W.2d 134, 137 (Tex. Civ. App.—Fort Worth 1946), aff’d, 198 S.W.2d 82 (Tex. 1946) (“In this latter connection it is to be remembered that the certificates of stock are not in themselves property, but are only evidence of the interest of the stockholder in the corporation.”); A. B. Frank Co. v. Latham, 190 S.W.2d 739, 741 (Tex. Civ. App.—Austin 1945), aff’d, 193 S.W.2d 671 (Tex. 1946) (“Nor does mere cancellation of the stock certificates effect a reduction of the capital. They are but evidences in the hands of the holder of his aliquot part of the legal capital of the corporation.”). See also Dewing, 96 U.S. at 196 (“The stock of such corporations may be held by a valid title without a certificate. The certificate is only one of the indicia of title. The right to the stock is in the nature of a non-negotiable chose in action.”).
A stockholder owns the stock whether or not he possesses the certificate and regardless of whether a certificate was ever even issued. Yeaman, 167 S.W. at 720 (Possession of a stock certificate “is not necessary to a subscriber’s complete ownership of the stock.”); Greenspun, 194 S.W.2d at 137 (“It is possible under some circumstances for one to own stock in a corporation though no certificate has been issued to him or endorsed or delivered to him, and likewise it is possible under some circumstances for title to the stock to pass without delivery of the certificate of stock or without written assignment of it.”); Estate of Bridges v. Mosebrook, 662 S.W.2d 161, 121 (Tex. App.—Fort Worth 1983, writ denied); Estate of Crawford, 795 S.W.2d 835, 838 (Tex. App.—Amarillo 1990, no writ) (“Complete ownership of certificated stock may exist without the issuance of a certificate or its delivery.”). “The certificate is simply the evidence in the hand of the subscriber on which he may be able to base an assertion of interest in the common fund. However, the title to the certificate may not carry with it title to the stock.” Turner v. Cattleman's Trust Co. of Ft. Worth, 215 S.W. 831, 832 (Tex. Comm'n App. 1919, jmt adopted).
Form and Validity of Certificates
A share certificate must state on the front of the certificate (1) that it represents shares in a Texas corporation, (2) the name of the person to whom the shares were issued, (3) the number and class of shares and series designation, if any, and (4) the par value of each share or a statement that the shares are without par value. Sec. 3.202(c) The certificate may contain an impression of the corporate seal, if any, or a facsimile of the seal may be printed or lithographed on the certificate. Sec. 3.202(a). A share certificate may not be issued in bearer form. Sec. 3.202(f) The certificate must be signed by an officer of the corporation, Sec. 3.203(a); however, a preprinted certificate signed with a facsimile image of a former officer no longer with the corporation at the time the certificate is issued is still valid. Sec. 3.203(b).