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The first shareholders of a company on incorporation are the subscribers. New shares are allotted/issued by the board of directors, if it has the authority to do so, and existing shares are transferred by current shareholders to other shareholders or third parties, subject to any restrictions imposed by the bylaws and the shareholders’ agreement, if any. In many jurisdictions, the current shareholder (or transferor) is required to execute a stock transfer form and hand it over to the transferee. There is also an automatic process, known as a transmission of shares whereby, on the death or bankruptcy of a shareholder, for example, the shares immediately pass to the deceased’s personal representatives or the bankrupt’s trustee in bankruptcy, respectively.

Share certificates issued by the company state the number and type of shares held. This acts as evidence of title to the shares. The shareholder’s name should also be entered on the register of members/share register, which states the name and addresses of every shareholder, together with the number and type of shares held. A shareholder becomes the registered legal owner of the shares only when the shareholder’s name is entered on the register. Prior to that, the shareholder is only the beneficial owner of the shares.