What it means
The document exists to manage risk for whoever is being asked to issue a replacement. If a share certificate is reissued and the original later surfaces in someone else's hands, two people may claim the same asset, so the issuer wants a sworn record of what happened before it takes that risk.
A usable affidavit is specific rather than general. It identifies the document by number, date and value, describes how and when the loss occurred, confirms the document was not sold, pledged or transferred to anyone, and states that the person swearing it is the rightful owner.
An indemnity undertaking almost always travels with it. The owner agrees to reimburse the issuer for any loss caused by the replacement, and for securities and other high-value instruments the issuer will usually insist this promise is backed by a surety bond from an insurance company.
The surety bond is the real cost. Premiums are commonly quoted as a small percentage of the value of the lost instrument, so a lost certificate worth a few hundred thousand dollars can carry a bond premium in the thousands, on top of notary and administration charges.
Timing matters more than people expect. Reporting the loss promptly limits the window in which a stolen instrument can be negotiated, and delay can weaken the claim, complicate the affidavit and raise the bond premium.
In practice
Real-world examples.
Example
A widow finds a share certificate listed in her late husband's estate schedule but cannot locate the paper itself. The estate files an affidavit of loss with the transfer agent, buys an indemnity bond, and the replacement shares are issued in the estate's name eight weeks later.
Example
A supplier reports that a $46,000 payment cheque never arrived. The paying company stops the cheque, the supplier signs an affidavit of loss, and a replacement is issued once the bank confirms the original has not been presented.
Example
A freight forwarder loses an original bill of lading in transit. The carrier will not release the cargo without it, so the shipper provides an affidavit of loss with a letter of indemnity from its bank before the container is handed over.
Formula
Calculation
Total replacement cost = (value of lost instrument x surety bond premium rate) + administrative and notary fees
An investor discovers that a share certificate for 5,000 shares has been lost. The shares trade at $84, so the instrument is worth 5,000 x $84 = $420,000.
The transfer agent requires an indemnity bond, and the surety quotes a premium of 2% of the certificate's value, which is $420,000 x 0.02 = $8,400. The transfer agent charges a $150 replacement fee and the notary charges $40.
The total cost of replacing the certificate is $8,400 + $150 + $40 = $8,590, or $8,590 / $420,000 = 2.05% of the value being recovered.Case study
Seen in the real world.
The following is an illustrative and entirely fictional example. When the founder of Wrenfield Holdings, an invented family investment company, died, his executor found a schedule listing a corporate bond certificate with a face value of $250,000 but no certificate in the deed box or the bank's safe custody records.
The issuer's registrar accepted an affidavit of loss sworn by the executor, describing the search undertaken and confirming the bond had never been pledged or sold, supported by an indemnity bond. The surety quoted 2.5% of face value, which is $250,000 x 0.025 = $6,250, and the estate's solicitor charged $1,800 for preparing and filing the paperwork, bringing the total to $6,250 + $1,800 = $8,050.
The fictional executor drew a practical conclusion from the exercise. She persuaded the family to move every remaining physical certificate into electronic book-entry form, which removed the possibility of a repeat and cost far less than the $8,050 the single lost bond had already consumed.
Watch out
Common mistakes.
- Writing a vague affidavit that does not identify the document by number, date and value, which registrars routinely reject and send back.
- Assuming the affidavit alone is enough, when most issuers also require an indemnity undertaking and, for valuable instruments, a surety bond behind it.
- Waiting weeks before reporting the loss, which widens the window for misuse and can make both the affidavit and the bond harder to obtain.
Questions
People also ask.
Does an affidavit of loss have to be notarised?
In almost all cases yes, because it is a sworn statement and the notary's role is to verify identity and witness the oath that gives the document its legal weight.
What happens if the original document turns up later?
It is normally void once a replacement has been issued, and the owner should return it to the issuer rather than attempt to use or sell it.
How much does the indemnity bond cost?
It is usually a small percentage of the instrument's value, commonly in the low single digits, with the exact rate depending on the surety's view of the risk and the circumstances of the loss.
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