Bearer shares definition with Advantages and Disadvantages

Bearer shares

An action to the carrier is one where the owner is who owns the physically title. And therefore, there is no name of the owner in it. Its mere possession presupposes ownership of the shares and therefore grants the quality of shareholder. In this article we will provide you the definition of Bearer shares.

It is a type of title issued by a company or company, where no name appears in the company’s social books. Contrary to what happens with registered shares, where there are records in the company’s books. It will then be the holder of the same, who proves to be the owner.

A bearer share makes the job easier for the companies that issue them. Since its transmission is much simpler than registered shares. Simply, it would be enough with the exchange of the title, without having to make notes in the commercial registers.

Advantages of a bearer share

Bearer shares have a number of advantages over other types of shares. We are going to comment on the main ones:

  • Simplicity in its transmission. The transfer from one owner to another is much faster than registered shares. Well, the simple “change of hands” is enough. In registered shares, it is necessary to introduce some records in the books of the company, therefore, the transmission time is longer.
  • Cost reduction. The no need for legal registration reduces costs in relation to other actions that do have this obligation.
  • Anonymity of the owner. As there is no record of the action, the owners of these actions are not known in principle. And therefore, neither to the participation that he may have in the company.

Disadvantages of a bearer share

Due to the degree of opacity that this type of action has, the limitation of its operation has increased over time. Above all, the non-ownership of this type of title has created both legal and banking restrictions. However, the limitations created have the same focus, the fight against money laundering .

Let’s see below some of the disadvantages for holders of this type of shares:

  • Limitation of its flexibility. Due to the constant fight against money laundering and tax fraud, the use of these actions has been limited. Even in those countries known as tax havens . In order to record the change of shareholder, an immobilization of the share is opted for. That is to say, that it is deposited in a financial institution. What is a detriment to its rapid transmission from one owner to another.
  • Bank limitation. Banks also make a strong effort to prevent money laundering. In this sense, banks usually avoid having as clients, companies that have capital issued in bearer shares. Due to the lack of identity of the owner of those shares. And in the event that they accept this type of client, the solution to this is what is commented in the previous disadvantage. That is to say, that the shares are deposited in the bank, and thus they have greater control of them.

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