What is a Bearer Form?

A bearer form describes a security, financial instrument, or negotiable instrument that has no owner of record. When security such as a bond or share which is payable to its bearer is not registered in the corporations book of the issuing company, it is a bearer form. A bearer form is also used in the context of a negotiable instrument such as check or banknote that is not payable to a specific payee. Bearer forms are payable to whoever is in possession of them or whoever tenders them with no record of the owner.

A Little More on What is a Bearer Form

The issuers of bearer form securities have no amount or record of who owns them. However, this absence of a record does not stand in the way of such securities being traded. The person in physical possession of bearer forms receives payments, despite that there is no evidence of ownership. The physical bearer of this security or negotiable instrument has the right to transfer the ownership to another party, this requires no record or documentation, all it requires it the physical transfer of the bearer certificate or negotiable instrument.

Securities issued by a corporation can be in two forms, either in bearer form or registered form. Registered securities have information or records in the corporation’s book while bearer forms have no record whatsoever. Given that corporations have the records of the owners of registered forms, payments are made to them directly. But in the case of bearer forms, the physical bearers of such securities or negotiable instruments are presumed to be the owners, the securities are payable to them. Bearer forms are commonly used by issuers who do not want to disclose their identity, thereby remaining anonymous. They offer bearer forms certificates which are payable to the holders of the instruments.

Two types of bearer forms certificates exist, these are;

• Bearer bond certificate: This is also called a coupon bond where payments are made to whoever is in possession of the bond certificate.
• Bearer stock certificate: This is a negotiable instrument payable to the holder. The person in physical possession of the bearer stock certificate has all the legal rights associated with the stock.

Certain jurisdictions, states, and countries prohibit bearer forms because of the tendency of individuals to use them for money laundering, tax evasions and other forms of fraudulent acts.