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I am a member in a private country club.  There are 320 stock certificates that have been issued out of a total of 350 in the treasury  of this club.  

Question:

We are a 60 year old privately owned club and we do not know where all the stock certificates that have been issued over 60 years are, in other words when we send info on a annual meeting to the registered owner of the certificate the info is returned, etc. We feel the certificate(s) is lost or buried in someone safe deposit box or who knows where as we have lost touch with the owner over the years as they have probably passed on.  If the certificate has been sold or inherited the individual is supposed to re-register through the club secretary the transaction and the transfer but that has not always been the case.  You are only supposed to hold 1 share per person as it states on the back of each certificate.  We also feel there have been sales of certificates  and someone may be hoarding them as they have not gone through the proper transfer/register process.

My main question is:  Can we do a re-call and re-issue of the certificates so we can get a handle on all of them? And if yes, how can we do it and do it legally with out a lawsuit in the future after someone missed the deadline set for the recall/re-issue.   I feel pretty sure at least 90% or 288 out of 320 would respond to the re-issue.  That would leave 32 shares & lets say we hear nothing after a period of time established in the recall from them, would those shares automatically return to the club treasury and could they be re-issued or basically re-sold after a proper time frame?  There is more to this but if you can send me some direction or information trail to follow I would appreciate.

Answer
Thanks for an interesting question - I'll put my member-organization hat on, I've been involved with a few member-based sports orgs over the years (cycling).

The first thing I'd look at is the bylaws, any language about transfers and terminations of membership interests. For example if it's in the bylaws you have a strong case for terminating interests of now-deceased members, or invalidating any transfers that resulted in a member with more than one certificate.

If the bylaws are silent, or if they leave open questions, then look at how these issues are addressed by the law of the state you're in (and/or where incorporated, if different). This will take some research - a nonprofit lawyer or legal guide would be a good start, assuming you're a membership-based nonprofit. Note that laws applicable to member-based orgs are typically different from those that apply to regular corporations.

I'd also be looking at the 32 missing certificates one by one, going as far back in the books as possible, and seeing exactly what the story is for each. If you have mail returned, you at least have a name and should be able to track down whether they've died or simply moved away. I'm guessing you've done that and drawn a blank otherwise you wouldn't be asking the question.

An idea that comes to mind is looking into a bylaw amendment, or amendment to your articles of incorporation if necessary, to do away with certificated shares entirely. The point being both to avoid this issue in the future, and flush out those certificate hoarders and lost memberships. In many states you aren't required to have certificates and if you're in one of those states you may be able to do away with them now. Instead, the Secretary just maintains a stock ledger and that is the sole record of ownership. That kind of change might require a member vote, rather than just a board vote, and you need to be careful about notice and other formalities given that you might be terminating the missing members' interests. You could still issue a membership card or that kind of thing, but it would lack the legal significance of a certificate.

Hope that's helpful and good luck sorting this out.

-Tad

General Stock Investment Strategies

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Tad Borek

Expertise

I am a San Francisco-based investment adviser and attorney.

Experience

I opened my investment advisory practice, Borek Financial Management, in 1999, and have been a licensed attorney since 1993.

I received my B.S from Cornell University, and a J.D. from George Washington University Law School.

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