The new Small Business, Enterprise and Employment Act (the "Act") which received Royal Assent in March this year, was brought in to deal with the issue of corporate transparency.
As such, one of the first provisions of the Act to be brought into force relates to Bearer Shares - shares for which the details of the holders are not entered into the statutory registers of the company.
As of 26 May 2015, section 84 of the act will come into force, prohibiting the creation of bearer shares regardless as to what is stated within a company's articles of association.
What are Bearer Shares?
Bearer Shares are not common in the UK and have historically been used for structuring and tax planning purposes. As the details of the holders of these shares are not entered into the statutory registers of the company, they are owned by whoever holds the certificate for those shares and are able to be transferred easily.
Under the new Act, Bearer Shares are to be abolished so as to ensure that it is clear as to who is the holder of the shares. Companies will no longer be able to issue new bearer shares and those already in existence will need to be surrendered.
What if you have issued Bearer Shares?
The relative number of companies in the UK which have issued bearer shares is minimal and as of 26 May will no longer be legally recognised. The holders of the shares will have nine months to have these converted into registered shares by way of surrender to the company.
There is an onus on the company to provide bearer shareholders with notice of this change and the procedure and also of the consequences of failing to comply with these. Companies which have issued bearer shares will have one month from 26 May 2015 to give the first notice to the holders of bearer shares. Between months seven and nine, all rights attached to bearer shares will be automatically suspended. Once the nine-month period has expired, the company's only option is to apply to the relevant court to obtain an order for the cancellation of these shares.
Amending your articles
Where there are provisions within the company's articles allowing for the issue of bearer shares, these can be amended by way of an ordinary resolution rather than a special resolution as normally required for an amendment to company articles.