Why Provisional Certificates Are Issued in Lieu of Share Certificates?
DOI:
https://doi.org/10.65380/bhd.2026.1.5Keywords:
share certificate, provisional certificate, registered share, bearer share, temporarinessAbstract
Joint-stock companies can issue share certificates to represent their shares. Issuing share certificates becomes mandatory for bearer shares after the full payment of the share price. Prior to this, certificates cannot be issued for these shares. However, until share certificates are issued, provisional certificates can be issued in place of shares, whether registered or bearer. Provisional certificates serve the same function as share certificates and provide the shareholder with the same rights as share certificates. However, due to their nature, provisional certificates function only for a temporary period. Therefore, provisional certificates are also called "interim" certificates. They remain valid until the share certificates are issued, and when the share certificates are issued, they are presented to the company by the shareholder to be exchanged for share certificates. The company receives the provisional certificates from the shareholders and delivers the share certificates in their place.
Despite this temporary nature of provisional certificates, in practice it is observed that they are issued to function continuously instead of share certificates. This practice is inconsistent with the meaning and function of provisional certificates.
The subject of this study is the discussion of when provisional certificates are needed.
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