How to reduce paper losses

Understanding the stock market; Even if you lose a share certificate, the company still holds a register of your interests

Losing a share certificate, or having it eaten by the dog, is inconvenient but it is not a disaster. If this happens to you, do not panic, as it does not mean that you have lost your investment.

A share certificate is issued by a company to show that the shareholder's name has been entered in the company's register of shareholders.

All companies are legally required to maintain a register of shareholders, containing details of the name and address and the number of shares held by each shareholder in the company.

The register is normally maintained by a registrar, which is generally one of the big banks. However, a few companies maintain their own registers.

Despite the trend towards paperless share ownership with shares being held by a nominee, many people - myself included - prefer to hold certificates. We all know that financial documents should be kept in a safe place. Nevertheless, however careful we are, mishaps do happen. Should you find yourself in this situation, follow this step-by-step guide to put matters right.

Either write to the company or, preferably, direct to the registrars if you know who undertakes this role. The addresses will be in the company's report and accounts. If you have not got these, your stockbroker, local library or BT's directory enquiries will be able to help.

When you contact the company or registrars, give as many details as possible:

n The name(s) the shares are registered in.

n If the company issues more than one category of share, identify which you hold.

n State the number of shares held.

n If possible, the serial number of the certificate(s).

n It would be helpful to enclose a photocopy of the latest dividend voucher.

In due course, the company's registrars will contact you. They may ask you to complete a form regarding your loss.

Before issuing a duplicate certificate a "letter of indemnity" will normally be forwarded for signature by all the parties in whose name the lost share certificate was issued.

In certain cases, generally when the market value of the shares represented by the lost share certificate is in excess of pounds 5,000, the letter of indemnity will have to be countersigned by a bank or insurance company. However, the pounds 5,000 figure is not an universal - some companies insist on the indemnity being countersigned for lower levels.

An indemnity is a contract in which the indemnifier (in this case the shareholder who lost the certificate), promises to compensate the other party (in this situation the company who issued the now lost certificate) should that party suffer any loss as a result of the issue of a duplicate share certificate. It is unusual, though not unknown, for there to be foul play surrounding a loss.

The requirement of a bank or insurance company to countersign the letter of indemnity may be viewed as a "belt and braces" approach. In situations where the indemnity has been countersigned, the company has two courses of action. If the first party, that is the shareholder, for some reason cannot reimburse the company for any loss that it has suffered as a result of issuing the duplicate certificate, then the countersignatory will be obliged to pay. This is why the party countersigning the indemnity has to be of undoubted integrity.

Banks and insurance companies also have their own interests to protect. They will generally take a counterindemnity from the shareholder who has lost the certificate. In other words, if they are obliged to pay, in turn they have recourse to the shareholder to whom the duplicate certificate was issued.

You will not be surprised to learn that the issue of a duplicate certificate is generally not without cost. Most companies charge pounds 15 plus VAT - making the total cost pounds 17.62 - while a few levy no charge. When a bank or insurance company is asked to countersign a letter of indemnity, a charge is usually made for the service.

This is typically 0.25 per cent of the market value of the shares, subject to a minimum charge. This can range from pounds 15 up to pounds 35 or more, though it may be waived for good customers of long-standing. Banks and insurance companies will only countersign a letter of indemnity for their customers. Some registrars have an insurance policy which dispenses with the need for a letter of indemnity. The premiums vary significantly, as does the market value which triggers the need for such insurance.

It makes sound sense to look after all financial documents carefully. Placing them in safe keeping at your bank is probably the best course of action.