Private Company Benefits of Using a Transfer Agent

More and more private companies around the world are employing the specialized services, and enjoying the benefits, of a professional stock transfer agency.

Traditionally, the number of shareholders in privately held companies is relatively small, and stock activity is not very high. Recordkeeping is usually the responsibility of a company official or the company’s legal counsel. Either way, this important task can become the duty of either someone ill-trained to do it well, or an overpriced third-party legal service.

Issuers that do not utilize a professional transfer agent may cause numerous problems for their investors. For example, shareholders who receive a stock certificate will need to know how to properly transfer their shares (if they make a private sale) under federal, state, and UCC rules without a qualified, affordable professional guiding them.  Additionally, shareholders may lose their stock certificate, creating a potential adverse claim and legal liability for the issuer.

These problems can even be magnified further under certain circumstances. If a large number of employee shareholders exist under an employee ownership plan, the task becomes more complex as activity increases. Additionally, if the company plans to go public, the accuracy of the records is extremely important for a successful IPO.

A stock transfer agent can issue shares, maintain your stock ledger, process share transfers, and replace lost stock certificates. The benefits of using a stock transfer agent for your private company include:

  • Significant cost savings
  • Maintain an electronic book-entry system
  • Benefits to investors including shares held in book entry form
  • Guidance with restricted legend removals
  • Reduction of liability and efficient support

Private and public companies both benefit from streamlined stockholder reports and correspondence. Along with the stockholder record maintenance system, stockholder communications and documentation is improved and streamlined.