Bearer Share

Updated on April 8, 2024
Article byWallstreetmojo Team
Reviewed byDheeraj Vaidya, CFA, FRM

What is Bearer Share?

Bearer shares are unregistered securities whose owners have a physical share certificate with them. The company that issues bearer shares neither feels the need to register itself as the owner of the same nor tracks the transfer of ownership and is charged with the responsibility of paying out dividends to the owners of the share certificate when it is presented.

Uses

One of the most common reasons to take bearer shares into use could be asset protection. It is high because these shares provide better privacy options, unlike no other. For example,- individuals who are not willing to bear the risks of their assets getting seized due to legal proceedings like divorce, liability suit, etc., might opt for their participation in bearer shares.

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Risks Involved in Bearer Shares

These shares may pave ways for money launderingMoney LaunderingMoney laundering is a criminal act of legitimizing the money acquired through illegal or unethical means by disguising the origin of the crime.read more, evasion of taxesEvasion Of TaxesTax Evasion is an illegal act in which the taxpayers deliberately misreport their financial affairs to reduce or evade the actual tax liability. This includes using multiple financial ledgers, hiding or representing lesser income, gains, or profits than actually earned, overstating deductions, & failing to file returns. read more, terrorism financing, and many other criminal activities. All these potential risks and threats associated with bearer shares ultimately killed this practice.

Bearer-share

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Advantages of Bearer Shares

Disadvantages of Bearer Shares

Conclusion

Bearer shares allow the privacy of the owner, ease of transfer, and help in the maximization of liquidity too. The name of the owner of these shares is mentioned as “the bearer.” These shares no longer exist as these have always been a challenge for tax authorities since fraudsters wrongly use these for tax evasion purposes.

It also paved ways for terrorist funding, money laundering, and various anti-national activities. Providing an ownership certificate is not possible in the case of these shares, and therefore, the identity of the owner cannot be justified at all. Even certain banks are against companies that use bearer shares as they feel the risk of getting exposed to vulnerable attacks.

This article has been a guide to what a bearer shares, and its meaning. Here we discuss risk involved in bearer share along with its uses, issues, advantages & disadvantages. You can learn more about accounting from the following articles –

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