Share certificate and transfer endorsement

Corporations Canada says a person can buy shares from an existing shareholder, according to the terms set out in the articles, and have the corporation register the transfer. Under the Canada Business Corporations Act (CBCA), every security holder is entitled, at their option, to a security certificate or to a non-transferable written acknowledgment of the right to one. See what happens on closing day and the share purchase agreement.

What the issuer looks for

Where a security in registered form is presented for transfer, section 76(1) of the CBCA says the issuer shall register the transfer if listed conditions are met. They include that the security is endorsed by an appropriate person as defined in section 65, that reasonable assurance is given that the endorsement is genuine and effective, and that any applicable tax-collection law has been complied with. Corporations Canada adds that transfers must conform to any conditions or restrictions on the shares, and directors could have to approve them.

What to check or ask

• Whether the corporation is federal (CBCA) or provincial, since a provincial corporation follows its own statute.
• Whether the articles restrict transfers or require director approval.
• Whether the certificate is endorsed by an appropriate person under section 65 of the CBCA, such as the person the security names as entitled to it or that person’s authorized agent.