# Bearer Shares: Ownership, Examples, Risks & Privacy Benefits

## What Is a Bearer Share?

A bearer share is equity security wholly owned by the person or entity that holds the physical [stock certificate](https://www.investopedia.com/terms/s/stockcertificate.asp), thus the name "bearer" share. The issuing firm neither registers the owner of the stock nor tracks transfers of ownership; the company disperses dividends to bearer shares when a physical [coupon](https://www.investopedia.com/terms/c/coupon.asp) is presented to the firm. Because the share is not registered to any authority, transferring the ownership of the stock involves only delivering the physical document.

Bearer shares confer greater privacy than traditional shares, but they are also legally complex. Most securities regulators have phased out or restricted their issuance due to the risk of money laundering. Some jurisdictions, like the Marshall Islands, continue to permit them to be issued.

### Key Takeaways

*   Bearer shares are owned by whoever holds the physical certificate, providing high privacy but no registration of ownership.  
    
*   Many countries have restricted or banned bearer shares to clamp down on illegal activities and enhance financial transparency.  
    
*   Ownership of bearer shares may involve higher costs due to the need for professional representation to maintain privacy.  
    
*   Bearer shares offer significant privacy, appealing to those seeking asset protection or wishing to avoid ownership disclosure.  
    
*   The decline in bearer shares use is partly due to associations with tax evasion and funding illegal activities, such as in the Panama Papers scandal.

## Understanding the Mechanism of Bearer Shares

Bearer shares lack the regulation and control of common shares because ownership is never recorded. Bearer shares are similar to [bearer bonds](https://www.investopedia.com/terms/b/bearer_bond.asp), which are fixed-income securities belonging to the holders of physical certificates rather than registered owners.

Bearer shares are international securities that were common in Europe and South America, but their use has declined due to government crackdowns on illegal activities related to anonymity. While some jurisdictions, such as Panama, allow the use of bearer shares, they impose punitive tax withholdings on dividends issued to owners to discourage their use. The Marshall Islands is the only country in the world where the shares can be used without problems or extra costs.

Over the past decade, many large foreign corporations have switched entirely to registered shares. Germany-based pharmaceutical giant Bayer AG, for example, started to convert all its bearer shares to registered shares in 2009, and in 2015, the United Kingdom abolished the issuance of bearer shares under the provisions of the Small Business, Enterprise and Employment Act 2015.

Switzerland, a jurisdiction known for its emphasis on secrecy in banking transactions, has abolished bearer shares. In June 2019, the Federal Council of the Swiss government adopted a new Federal Act declaring the end of bearer shares, with the exception of publicly-listed companies and intermediated securities. All other bearer shares must be converted into registered shares.

In the United States, bearer shares are mostly an issue of state governance, and they are not traditionally endorsed in many jurisdictions' corporate laws. Delaware became the first state in the U.S. to ban the sale of bearer shares in 2002.

> **Important**
>
> Some investors like bearer shares for privacy, but this comes with higher costs for attorney fees and taxes.

## Benefits of Using Bearer Shares

The only tangible benefit to be gained from using bearer shares is privacy. The highest degree of anonymity possible is maintained with respect to ownership in a corporation by a holder of bearer shares. While banks know the buyers of the shares, they [are not required to reveal their identities](https://www.investopedia.com/terms/n/nobo.asp) in some places. Banks may also receive dividend payments on behalf of the shareholder and provide ownership confirmation at shareholders' general meetings. Moreover, purchases can be made by a representative, such as a law firm, of the actual owner.

Bearer shares have some valid uses, despite their inherent detriments. Asset protection is the most common reason to use bearer shares because of the privacy they provide. For instance, people worried about asset seizure in divorce or lawsuits may use bearer shares for protection.t

## Risks and Downsides of Bearer Shares

Owning bearer shares can be costly due to the need for professional advice to maintain anonymity. Unless the bearer shareholder is a financial and/or legal expert in these matters, avoiding the many legal and tax traps associated with bearer shares can be a difficult challenge.

Also, in a post-9/11 world in which the threat of terrorism looms heavily, part of the strategy to counter the threat is to cut off the sources of terrorist funding. Many jurisdictions have tightened rules or banned bearer shares due to their use in funding terrorism and money laundering.

## Real-World Example of Bearer Shares: The Panama Papers

For example, the [Panama Papers](https://www.investopedia.com/terms/p/panama-papers.asp) scandal extensively used bearer shares to conceal the true ownership of shares. The Panama Papers scandal was a leak of financial files that exposed a network of more than 200,000 tax havens involving high net worth individuals, public officials, and entities from 200 nations.﻿﻿ It resulted in the reluctance of many banks and financial institutions to open accounts or have any associations with corporations or shareholders that deal with bearer shares. The choice of jurisdictions and financial institutions willing to deal with bearer shares has narrowed significantly.

> **Article Sources**
>
> 1.  Bayer. "[Announcement of the conversion of the no-par value bearer shares to no-par value registered shares](https://webcache.googleusercontent.com/search?q=cache:uLbccyTfB7YJ:https://www.investor.bayer.de/securedl/1767+&cd=1&hl=en&ct=clnk&gl=us)." Accessed Aug. 27, 2020.
>     
> 2.  The National Archives. "[Small Business, Enterprise and Employment Act 2015: Abolition of share warrants to bearer](https://www.legislation.gov.uk/ukpga/2015/26/part/7/crossheading/abolition-of-share-warrants-to-bearer/enacted)." Accessed Aug. 27, 2020.
>     
> 3.  The Federal Council. "[Federal Council brings Federal Act on Implementation of Recommendations of Global Forum into force](https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-76559.html)." Accessed Aug. 27, 2020.
>     
> 4.  Delaware Corporate Law. "[Facts and Myths](https://corplaw.delaware.gov/facts-and-myths/#:~:text=In%202002%2C%20Delaware%20became%20the,regulatory%20oversight%20of%20common%20shares.)." Accessed Aug. 27, 2020.
>     
> 5.  International Consortium of Investigative Journalists. "[Explore the Panama Papers Key Figures](https://www.icij.org/investigations/panama-papers/explore-panama-papers-key-figures/)." Accessed Aug. 27, 2020.