Many South Africans still hold shares in physical certificate form, particularly older investments acquired before the widespread use of electronic trading platforms. These certificates may represent holdings in JSE-listed companies, inherited family investments, or shares acquired decades ago through employee share schemes.

When a shareholder dies, these certificated shares form part of the deceased estate and must be administered by the executor. The process can be more complex than dealing with modern electronic share portfolios, particularly when original certificates have been lost or misplaced.

What Are Certificated Shares?

A share certificate is a physical document issued by a company as evidence of ownership of shares. Before the introduction of electronic custody systems such as Strate, investors were commonly issued paper certificates reflecting the number and class of shares owned.

Although most shares are now held electronically through brokers and central securities depositories, many historical shareholdings remain in paper form.

The share certificate itself is not the asset. It is merely evidence of ownership. The actual asset is the shareholder's interest in the company.

When a shareholder dies, the shares may either be transferred to a beneficiary or be sold and the proceeds distributed through the estate.

Where the shares are sold, the executor will need to provide the original share certificate along with other estate documents.

Many transfer secretaries will first require the shares to be converted into electronic form before a sale can take place.

The sale proceeds are paid into the estate late bank account and ultimately distributed in accordance with the Liquidation and Distribution Account.

If the Will bequeaths the shares directly to a beneficiary or the residual beneficiary(ies) opt to take transfer of the shares, the executor must arrange for the shares to be registered into the beneficiary's name. Again, the original share certificate and other estate documents is required to be provided by the executor.

Once transferred, the beneficiary becomes the legal owner and can choose whether to retain or sell the shares.

What if the Original Share Certificate Cannot Be Found?

A missing certificate is one of the most common problems encountered in deceased estates involving older shareholdings.

Fortunately, ownership is not lost simply because the certificate cannot be located.

The executor must contact the company's transfer secretary and advise that the certificate has been lost. The transfer secretary will generally require:

• Written notification of the loss.
• Proof of ownership details in the form of proof of an incoming dividend payment.
• Completion of a lost certificate declaration.
• An indemnity form.

In many cases the executor will be required to obtain a bank or insurance-backed indemnity to protect the company against future claims should the original certificate resurface.

Only once the company is satisfied that ownership has been proven will a replacement certificate be issued or the shares be converted into electronic format.

The requirements differ between transfer secretaries and the value of the holding.

Practical Advice for Shareholders

To make estate administration easier and to avoid unnecessary delays, shareholders should:

• Keep original certificates in a secure location. It is a good idea to either keep the original certificate in your Life File or keep a register of them therein along with where the original(s) are safely kept.
• Maintain an updated list of investments.
• Inform family members or executors where certificates are kept.
• Periodically verify that contact details recorded with transfer secretaries remain current.
• Consider dematerialising older certificated shares into electronic form.