Bearer share is a security confirming the shareholder’s right to a company that is owned by its holder. The holder of such shares is acknowledged as legally rightful shareholder and has all the appropriate rights. Such a share certificate does not contain information about the owner, and all the respective rights on the company belong to the bearer of the share.
Owner of bearer shares is considered to be the owner of the relevant share certificate. The company or the director of the company, as well as chairman of the meeting of shareholders are not required, in case of bearer shares, to explore the circumstances under which the share is transferred to the bearer. Shareholders shall fully recognize the rights of other holders of bearer shares.
Such shares are transferred by giving a endorsing certificate to the holder. In case of sale of bearer shares it is not necessary to perform any inscriptions on the certificate, or prepare supporting documents for the sale. The share is simply transferred to the new holder. Together with the share, the bearer receives the entire set of rights on the company.
The main prerequisite of bearer shares issue is an opportunity provided by the legislation of the country where the company is registered. Moreover the fact of a possible issue of bearer shares shall be reflected in the incorporation documents of the company. The director of the company decides on the issue of bearer shares. If such decision is made, endorsing certificates are issued together with the shares.
The certificate of the bearer shares it is the main document that certifies ownership of shares. Certifying certificate contains the following information:
- Serial number of certificate;
- Full name of issuer;
- Share capital of the company;
- Total number of shares represented by this certificate;
- Date of issue of the appropriate certificate.
A paragraph indicating owner of shares contains instead of the name of the owner of the share the word “bearer”.
All of the above refers purely to regulatory provisions in the legislation of various countries, including the United Arab Emirates, rules regarding issuance and circulation of bearer shares.
Some time ago these shares were very popular in offshore jurisdictions. Today, however, they have almost lost their meaning and possibility of practical application and their issue is banned by most countries including the UAE.
This is due to the latest trends in international law and legal norms. Global confrontation against laundering of financial income and concealment of funds from taxes negated all the possibilities of practical application of bearer shares.
Today, many offshore jurisdictions have introduced an absolute prohibition on the issue of such shares. And in places, where there it is still possible to issue bearer shares, the requirements for their issue become much tougher, among them:
- There is a mandatory requirement about reflection of information about final beneficiary in order to register a company with bearer shares;
- Mandatory fixing of the fact of ownership of such shares in the internal documents is necessary;
- Transfer of bearer shares is recorded in the register of shareholders;
- Direct transfer of bearer shares to the owner now, as a rule, is not carried out, and the shares are held by the registered agent or other authorized person.
In practice there are serious penalties in case of late or incorrect execution of transactions relating to the transfer of bearer shares;
Mandatory requirement to deposit bearer shares to open a bank account for a company has also been introduced;
In real life, because of all the above, issue of bearer shares in the UAE is no longer practiced.
