Bearer Share
A bearer share is equity security wholly owned by the person or entity that holds the physical stock certificate, thus the name "bearer" share. The issuing firm neither registers the owner of the stock nor tracks transfers of ownership; the company disperses dividends to bearer shares when a physical coupon is presented to the firm. Because the share is not registered to any authority, transferring the ownership of the stock involves only delivering the physical document.
Bearer Shares
Definition
Bearer shares are equity securities that are entirely owned by the individual or entity in possession of the physical stock certificate. These shares are called 'bearer' shares because the issuing company does not register the owner of the stock or track the transfer of ownership. Dividends are paid to the bearer of the physical certificate when presented to the company. Since the shares are not registered with any institution, the transfer of ownership involves only the delivery of the physical document.
Origin
The concept of bearer shares originated in the late 19th and early 20th centuries when stock trading primarily relied on physical stock certificates. With the development of financial markets and technological advancements, many countries have shifted to electronic registration systems, but bearer shares still exist in certain markets and specific situations.
Categories and Characteristics
Bearer shares have the following key characteristics:
- Anonymity: Since the holder's information is not registered, the holder can remain anonymous.
- Ease of Transfer: Ownership transfer only requires the delivery of the physical stock certificate, without the need for complex registration procedures.
- Security Risks: There is a risk of loss or theft of the physical stock certificate, which could result in the loss of ownership.
Specific Cases
Case 1: Investor A holds a bearer share certificate and decides to sell it to Investor B. A only needs to hand over the physical stock certificate to B, who then becomes the new holder without notifying the issuing company or undergoing any registration.
Case 2: A company issues bearer shares, and Investor C purchases these shares and holds the physical stock certificate. When the company distributes dividends, C only needs to present the stock certificate to the company, which will then pay the dividends based on the information on the certificate.
Common Questions
Q: What are the main risks associated with bearer shares?
A: The main risks of bearer shares include the loss or theft of the physical stock certificate, which could result in the loss of ownership. Additionally, since the holder's information is not registered, tracking and proving ownership can be challenging.
