There is a certain mystique around bearer shares that has been exacerbated by a substantial number of Hollywood movies. Seemingly the preserve of Swiss bankers, and international intrigue, the ubiquitous share instrument is actually not as unusual as you might think. Subsequently, I will dig into exactly what exactly is a bearer share and how they can be used in 2022.
Most share or equity instruments are what we call ‘Registered’ in that they are actually listed on a physical share register as being issued to a specific person or company. Although a share certificate is still issued in many jurisdictions it is really the actual share register that keeps a record of who owns what shares.
In contrast, a Bearer Share has no physical ownership over than the actual share certificate. What this means is that whoever holds the actual physical share certificate is the owner of the company. Hypothetically, this means that an ownership transfer can be made by simply handing that certificate to someone else.
Now you own it, now you do not.
This Sounds Great for Privacy!
In theory, using anonymous equity instruments sounds beneficial given that there would be no way to establish actual ownership of the company. Unfortunately, this exact reason is why it is significantly more difficult to use in 2022.
Bearer Shares have been misused over the years and have been involved in everything from money laundering to other criminal activities. Subsequently, their use and transfer has been severely curtailed in recent years.
The Impact of AML/KYC Rules
Given the high-risk nature of anonymous share ownership, there have definitely been moves to stamp out their use. In fact, today, most jurisdictions will require that the share certificate must be held by the registered agent and the name of the owner be entered into a privately held ledger.
Subsequently, there is significantly less privacy for those using these sorts of shares to hold ownership of a company. Any sort of legal challenge is likely to bring with it the release of the ownership registers from your registered agent.
The other issue that you are likely to face is that it is becoming increasingly more difficult to obtain banking services unless there are registered shares for a company. Banks are required to confirm who the ultimate beneficial owner (UBO) actually is, and transferable shares scare them.
Therefore, you are likely to find it next to impossible to arrange banking facilities for your new offshore company if you are using bearer shares in any form.
Practical Benefits in 2022
However, there are still plenty of benefits for those seeking to anonymize their ownership of company. In fact, there are plenty of use cases where you might not even require banking for your IBC, and this makes bearer shares advantageous.
Anonymous Asset Holding
If you are looking to buy real estate or another form of asset and wish to obscure who the actual owner is than this might be an option for you. The property can simply be placed into the name of the offshore company, and it then becomes almost impossible to find out who the ultimate owner actually is.
Intellectual Property
Another use case is that of holding intellectual property in an anonymous offshore corporation. One of the modern problems for those registered IP is the patent trolls that lurk in every corner. As soon as you move to register your innovation, you have attorneys coming out of the woodwork wanting to commence action against you for infringement.
An offshore company, structured appropriately, will see them running for the hills when it becomes apparent it is impossible to establish who owns it.
Easy Transfer of Assets and Avoidance of Capital Gains Tax
The transfer of the ownership of the company simply means handing the share certificate over (and advising your registered agent). Along with the company goes all of its assets which means the sale/transfer of real estate or other assets is exceedingly simple.
Additionally, this often avoids the impost of a capital gains tax or transfer tax of specific types of property, such as real estate. The actual property is not changing hands but only the company’s ownership through the transfer of shares.
Crypto Currency Holdings
Finally, the world of crypto has been increasing litigiousness recently and asset protection has become a big point for those looking to protect their holdings. As always, to sue someone, you need to find them first. Subsequently, the use of anonymous share ownership structures means that it is exceedingly hard to identify the owner.
I will leave you to use your imagination on how regular transfers of ownership might frustrate any potential litigants.
Conclusions
In conclusion, the use of Bearer Shares has definitely reduced in recent years as the lack of banking facilities available to them has disappeared. However, as an anonymous form of ownership they still retain their usefulness.
In particular, the privacy applications around IP holding and real estate can not be understated. Additionally, the ease of transfer of assets means that you can effectively change the company’s ownership at will.
Subsequently, as long as you are unlikely to require banking services than an anonymous bearer share corporation might work well for you in respect to privacy and asset protection.
Dave Wright
Steven James
