Transfer agents and registrars
You will need to appoint a transfer agent and registrar
before the closing of your IPO. Stock registration and
transfer services are provided by commercial banks and trust
companies. Companies often appoint the same organization
to provide both services. Furthermore, the same firm can
assist during the IPO process by acting as the custodian and/
or paying agent in connection with the sale of securities by
any selling shareholders.
For most companies undertaking an IPO, the question of
transfer agents and registrars is one of both expediency and
regulation. Both the NYSE and NASDAQ require that all listed
securities be eligible to participate in the Direct Registration
System (DRS) offered by The Depository Trust Company
(DTC). In order for any securities to become DRS-eligible,
the DTC requires that the issuer appoint a transfer agent
who is a participant in the DTC’s Fast Automated Securities
Transfer program, as well as meet certain other eligibility
requirements. The DRS enables the registered shareholders
to maintain and transfer their shares on the books and
records of the transfer agent in book-entry form instead of a
physical stock certificate. Participating in DRS can save costs
involved with replacing stock certificates that are lost, stolen,
A public company will usually have a large number of
shareholders and, as regular trading develops, shares likely
will change hands daily. Not only is this an administrative
burden, but transfers must be handled with absolute
accuracy, because any mistake can lead to claims against
the company and possible financial liability. An independent
transfer agent and registrar can assume responsibility for
making sure that mistakes in stock transfers do not occur.
Further, as a practical matter, your agreement with the
underwriters may require such independent agents.
The transfer agent’s primary responsibilities are to handle
the transfer of shares from one person to another and to
maintain the stock books that are the official records of
the names and addresses of the company’s shareholders.
Ancillary responsibilities assigned to transfer agents may
include disbursing cash dividends, mailing annual reports
and proxies, distributing stock dividends, responding to
shareholder inquiries relating to their shares, and keeping
custody of unissued stock certificates.
Registrars are responsible for making sure that stock is not
over-issued in excess of the number of authorized shares.
They countersign all stock certificates to make sure the
number of shares issued is not greater than the number
surrendered for cancellation, and they keep active records
of all the shares that are outstanding. Registrars also keep
records of the certificates that have been canceled, lost, or
destroyed, as well as those that have been issued, so that
at any given moment they have an exact record of shares
outstanding. Part of their role is to cross-check the work of
the transfer agent.
A summary of the transfer agent/registrar process is listed
on the next page. See also Appendix D: A timetable
for going public for steps taken by a transfer agent and
registrar in the illustrative IPO timeline.