Bearer shares, shares that have been issued but where no-one has been registered as the owner of the shares, will be abolished from 26 May 2015 following implementation of amendments to the Companies Act 2006 by the Small Business, Enterprise and Employment Act 2015 (SBEE). No new bearer shares will be able to be issued and SBEE applies a prescribed procedure requiring the conversion or surrender of existing bearer shares within a fairly short timescale (the first notice must be sent by 26 June).
Any bearer share not surrendered by 26 December 2015 can no longer be transferred (any purported transfer is void) and has no rights attaching to it (including voting rights and rights to a dividend / distribution). Any distribution it would otherwise have received must be paid into a separate bank account. Companies which still have bearer shares on 26 February 2016 will be required to apply to court to cancel them. Within 14 days of cancellation the company will be required to pay into court an amount equal to the nominal value of the shares and any suspended distributions.
Impact – companies should check their records now to identify and contact those (if any) to whom bearer shares were issued. Failure by a company to follow the prescribed procedure for dealing with bearer shares is an offence. In the context of a proposed acquisition, target companies’ share history should be closely reviewed to ensure any outstanding bearer shares are identified. A company with outstanding bearer shares will not be able to be struck off.