Keywords: bearer shares, registered shares
The Small Business, Enterprise and Employment Act 2015 will bring significant changes to certain areas of company law. This quick reference guide tells you in a nutshell what is happening to bearer shares and who needs to know. For those to whom it is relevant, it then sets out some more detail on the changes.
| What are bearer shares? | Bearer shares are shares that have been issued but are not written up in the company's register of members. Ownership of them is determined solely by possession of the share certificate. Companies could only issue bearer shares if their articles of association allowed them to.1 |
| What's happening? | Bearer shares in UK companies are being abolished. |
| When? | 26 May 2015 – new bearer shares
can no longer be issued. 26 February 2016 – the period for surrendering existing bearer shares ends. All bearer shares remaining in issue on this date will be cancelled. |
| Why? | To increase corporate transparency (this is part of a series of transparency measures in the SBEE Act). |
| Who needs to know? | Holders of bearer shares will need to
look out for notices inviting them to surrender their shares. If
the bearer shares are not surrendered they will be cancelled. Companies which have issued bearer shares will need to call for their surrender. A detailed process (summarised below) is set out in the SBEE Act and there are criminal sanctions for failing to take any of the steps laid down. Companies whose articles of association permit the issue of bearer shares (this would not be the norm) may alter their articles to remove the relevant provision without the need for a special resolution (an ordinary resolution will do). |
| How will this be achieved? | The rest of this note sets out the procedure that must be followed by companies and holders of bearer shares. |
Footnotes
1. Note that the SBEE Act refers to bearer shares as share warrants. This is short for "share warrants to bearer". They should not be confused with the equity instrument known as a share warrant which entitles the holder to the issue of new shares. Share warrants in this sense are not affected by this legislation.
2. NB The registrar will not register the cancellation order or suspended cancellation order if the company is a public company and the effect of the order will be to bring the nominal value of its allotted share capital below the authorised minimum. The company will have to re-register as a private company.
Originally published 11 June 2015
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