In the world of stocks, bonds, and shares, there is a type of financial instrument that is referred to as a bearer share. Essentially, a bearer share is understood to be a stock certificate that is payable to the person who is actually in possession of the share at the time that the share is put up for sale. The bearer share may be in the possession of the person or entity who originally purchased the share, or it could be someone who acquired the bearer share through such means as a sale, inheritance or as payment on a debt. Here is some background on how a bearer share functions, and what this means to the individual or entity that is in possession of one or more bearer shares.
Many companies issue a limited number of stock certificates that do not include the name of the purchasing party. When this sort of transaction occurs, there is no record of ownership registered by the seller or the corporation that originally issued the stock in the first place. This creates a situation where it is assumed that the individual who actually has the physical shares in his or her possession is the legal and rightful owner. Proving otherwise can be an extremely difficult process.
Persons may come into possession of bearer shares in several manners. Perhaps the most common means has to do with inheritance. Individuals may choose to bequeath a fixed number of bearer share certificates to loved ones, who inherit the shares upon the death of the original owner. Since there is no owner of record for the shares, there is really nothing that the recipient has to do, other than physically receive the shares and keep them in a safe place. Any bearer share that is received from a benefactor can easily be sold, if desired, or placed into a secure holding place, for use at a later date.
Bearer shares are also sometimes use to settle outstanding indebtedness. When an individual or company is unable to meet financial obligations, the shares may be provided to the debtor at either the current fair market rate or at a price per share that is agreed upon between the two parties. Since a bearer share does not have an owner of record, there is nothing that the debtor has to do, other than take physical possession of the shares.
The bearer share is often viewed as a means of providing a means of building up assets that can be utilized with relatively little paperwork or procedures involved. As a means of providing an inheritance to others, or as a quick way to use available assets to settle outstanding debts, the bearer share works with an ease that is only slightly more difficult than a cash transaction.
