Physical vs. digital share certificates – this is the difference

What is a share certificate? 

A share certificate is a document that shows who owns the shares. Today, most companies choose to manage share certificates digitally, meaning through a digital share ledger – without paper, envelopes, or the need to track down originals. A digital solution makes it easier to keep track of ownership and handle transfers in a smooth and secure way.

What is what?

Physical share certificates

A physical share certificate is an original paper document, signed by the entire board of directors, that serves as proof of ownership. The document is handed over to the shareholder, and in the event of a transfer, the assignment is signed on the back. The company then updates the share ledger.

Old share certificates still exist at some companies, but they are mostly used as historical documents rather than for day-to-day administration.

Digital share certificates

When people refer to “digital share certificates,” they are in practice referring to digital management of the share ledger. In this setup, the share ledger shows ownership, and processes such as transfers or pledges are handled smoothly online — often both faster and more secure than paper-based handling.

What is a share certificate? Learn more here.

Pros and cons

Physical share certificates

Advantages

• Provide a sense of security, like having a “receipt in hand.”
• Some banks still require a physical share certificate in connection with pledges.

Disadvantages

• The original must be monitored and stored securely. If you lose a physical share certificate, a formal cancellation process with the Swedish Companies Registration Office is required, which often takes more than a year before a new certificate can be issued.
• Paper handling in connection with ownership changes makes the process slower.
• Old share certificates can be difficult to trace and manage, especially if the company has changed its board or share ledger.

Digital Management (Share ledger)

Advantages

• Fast and efficient, as both the company and the shareholders can easily see who owns what.
• Ownership changes and other updates can be handled directly online.
• Lower risk of lost originals or lengthy legal processes.

Disadvantages

• If a party requires a physical share certificate (for example due to specific pledge routines), a paper document may still be needed.

When should you choose what?

It is actually quite simple: for most companies and situations, digital management of the share ledger and share certificates is sufficient. Ownership is always up to date, transactions can be registered quickly, and you avoid worrying about lost originals. Digital management is therefore the natural first choice for many business owners today.

There are still situations where a physical share certificate is required, even though they are very rare. This may involve a bank that requires an original document in connection with a pledge, or a counterparty in a transaction that explicitly wants to see a paper document. Some owners also appreciate the feeling of having a formal proof of ownership.

In almost all cases, digital management is faster, more secure, and more practical, while a physical share certificate is only needed in exceptional situations. By choosing the right method for your company, you can both simplify administration and protect the interests of shareholders.