Bearer shares—how to avoid a grizzly ending

Bearer shares—how to avoid a grizzly ending

How will the upcoming changes to bearer shares affect lenders? Ruth Marken, partner at Olswang, profiles the detail of the changes to an antiquated form of share ownership, offering the lowdown on how bearer shareholders should aim to deal with the coming changes.

What has been the traditional role of bearer shares?

The most typical scenario in the UK is that ownership of shares is determined by looking at a company’s register of members. With bearer shares, however, ownership is determined by the person who is in actual possession of the share warrant at any particular point in time. As a result of this, bearer shares have been used historically in structuring and tax planning (although they are not common in the UK today).

What is happening in relation to bearer shares in February this year?

The issue of new bearer shares was abolished last year. There is currently a grace period during which, holders of existing bearer shares can surrender and convert them into registered shares. This grace period will end on 26 February 2016.

Why is the change happening now?

Jurisdictions that issue bearer shares have historically been subject to criticism from the international community. Many countries feel that their use leads:

  • to tax evasion
  • money laundering and
  • other criminal activities due to the difficulties of determining ownership

In 2013, the UK government decided to introduce legislation to ban bearer shares in a drive for greater corporate transparency. The relevant legislation was included in the

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About the author:

Miranda is a solicitor specialising in leveraged and acquisition finance. She trained at Hogan Lovells International LLP and qualified into the international banking and finance team. During her time at Hogan Lovells she worked on a variety of domestic and cross-border transactions, acting for both borrowers and lenders. She also experienced secondments to Barclays Bank PLC and Kaupthing Bank hf.