Bearer Shares & Banking [Bearer Share]

Bearer shares were once a favorite tool of the offshore world. They offered complete anonymity and could be easily bought or sold… 100% anonymously.

But, like most tricks of the offshore world, they’ve almost entirely disappeared. And, if you have any interest in commercial ties with reputable institutions, bearer shares will not be accepted as proof of company ownership.

Between 2000 and 2019, increasing pressure from the OECD and other regulatory bodies forced offshore hubs to eliminate bearer shares.

Today, the only bearer shares available are a fraction of their former selves. They’re shunned by banks, hated by tax authorities, come with special penalties, and should be avoided almost 100% of the time.

KEY TAKEAWAYS

• Mobile bearer shares no longer exist
• There are many risks & challenges that come with owning a company through bearer shares
• It’s extremely difficult to open a bank account for a company with bearer shares
• There are many alternatives to bearer shares

This article will give you a complete rundown on how bearer shares work – why they were loved, how they were used, and even how you can still use them today. Plus, we’ll tell you why you really shouldn’t and what you should do instead.

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Feel free to use the table of contents to jump ahead to the sections most relevant to you.

Table of Contents

1. 1. Mapping the Use of Bearer Shares Today
   2. How Does a Bearer Share Work?
   3. Ownership Disadvantages and Risks of Bearer Shares
   4. Bearer Shares and Offshore Bank Account Opening
   5. Why Hold Bearer Shares?
   6. Alternatives to a Bearer Share?
   7. Frequently Asked Bearer Shares Questions
   8. Do You Want Help Opening Bank Accounts?

Mapping the Use of Bearer Shares Today

Before the war on bearer shares (and global obsession with transparency), you used to be able to set up a company and choose between holding your shares as registered shares or bearer shares. This was true in pretty much every structuring jurisdiction.

Note: We use the term “structuring jurisdiction” intentionally. Bearer shares were not just an instrument of offshore finance, they were popular across many developed countries and major financial centers around the world.

The downfall of bearer shares didn’t begin until the year 2000. That’s when the OECD started pressuring jurisdictions to eliminate them — if not, they’d be promptly thrown on a “blacklist” that would destroy their economy.

Today, only a handful of countries permit them. But, these bearer shares have severe limitations and are best avoided in almost all circumstances.

Even some of the most popular offshore structuring jurisdictions like Seychelles have completely moved away from bearer shares (as seen below). So if you are considering Seychelles company formation with a bank account, bearer shares will not be an available option.

Here are some offshore jurisdictions where bearer shares are still available today:

*Last updated January 21, 2021

As you can see, this table references two types of bearer shares: mobile and immobilized. Mobile bearer shares refer to the traditional bearer shares which offer 100% anonymity and flexibility. But, as this table illustrates: there is no country in the world that still offers mobile bearer shares.

Today, if you want bearer shares, the only option is to hold or immobilize bearer shares. Let’s take a closer look.

How Does a Bearer Share Work?

Mobile bearer shares have been wiped off the face of the planet. They no longer exist… Anyone who says otherwise is either lying, misinformed, or hasn’t updated their website since 2019.

Immobilized bearer shares are, on the other hand, alive and well — still available in a few remaining jurisdictions. But, they come at a cost and, in almost all instances, should be avoided.

What Are Mobile Bearer Shares?

Mobile bearer shares refer to unregistered securities that are owned by whoever has the physical share documents in their possession. The owner of the is whoever holds the physical share certificates. There is no public or private registry of the ownership, nor is there a record of any transfers of ownership.

That means, if the owner loses or misplaces those shared documents, they own nothing. If you give those share documents to your grandmother, your grandmother owns the company. If your neighbor steals those share documents from your vault, your neighbor instantly becomes the new owner of your company. You get the picture.

It’s all about the possession of physical share documents.

But, as mentioned, mobile bearer shares no longer exist and have been completely eliminated from all offshore jurisdictions.

Today, the last remaining holdout in the bearer shares family is the immobilized bearer share.

What Are Immobilized Bearer Shares?

Immobilized bearer shares refer to securities that are held in custody for the owner by a registered agent, typically a licensed provider, in the country of registration. At the time of custody, the name of the ultimate beneficial owner is recorded along with the shares, providing a sworn record of the true owner.

In other words, immobilized bearer shares are not much different than holding registered shares in a country with a private corporate registry.

Ownership Disadvantages and Risks of Bearer Shares

If you’re considering owning a company through bearer shares, you need to know the pitfalls and challenges that you’re going to face. In this section, that’s exactly what we’ll cover, including some of the most pressing bear shares disadvantages.

Taxation

Bearer shares are demonized by governments. They’re typically cited as a force for evil — enabling criminals, terrorists, and tax evaders to remain anonymous while skirting regulators and authorities. So it’s no surprise that most countries have banned bearer shares altogether.

But a few enterprising nations have taken a different approach, turning the global crackdown into a profitable opportunity — providing business owners with privacy and generating new tax revenue in the process.

For example, Panama charges a 20% tax on dividends distributed to owners of Panama corporations who hold ownership via bearer shares instead of registered shares. In other words, if you really want to use bearer shares, no problem — but it comes at a price.

Custody

As discussed, immobilized bearer shares are shares that are held in custody by a registered agent, lawyer, or other licensed professional — this is the case in all of the countries referenced in the table above.

So naturally, if you plan on owning a company through bearer shares, you need to trust the lawyer or agent that will be taking custody of them implicitly. And unfortunately, in many backwater jurisdictions, there are higher ratios of licensed professionals with low standards that should be avoided.

Reputational Damage

In the past, we’ve talked about the reputational consequences of banking in a blacklisted, greylisted, or unsavory jurisdiction. If a country (or bank) has a negative stigma or poor reputation, then you can be negatively impacted. Whether you’re sending or receiving money, the person or company on the other end of the transaction may raise eyebrows and question your credibility, trustworthiness, and even financial position.

The same is true for bearer shares…

Think about it. There are countless times when a business owner needs to demonstrate legitimate ownership of a company. This includes completing transactions, investing, winning bids (or new customers), acquiring real estate, entering into agreements, obtaining financing, and of course opening bank accounts.

When bearer shares are presented, the owner’s intentions, as well as the company’s legitimacy and credibility, are immediately called into question. Why are you using an outdated method of ownership? Why don’t you have registered shares like 99.99% of companies?

Even if the owner’s intentions are 100% legitimate and legal, bearer shares have a negative reputation which is hard to shake. Legitimate institutions don’t want to deal with them anymore and they’ve fallen out of favor. Their use raises questions and attracts scrutiny. And, that negative stigma rubs off on the owner and the company.

Bearer Shares and Offshore Bank Account Opening

Now, let’s talk banking. If you’re setting up a company, there’s a strong possibility that you’ll need to open a bank account at one point or another. So, an important question is: can you open a bank account for a company with bearer shares?

Well, the straight answer is that it’s almost impossible. That’s because the financial industry has turned its back on bearer shares, thanks in large part due to regulatory pressure.

So, instead of providing a step-by-step guide on how to open accounts for owners with bearer shares this section will instead serve as a warning.

If you plan on opening a company with bearer shares, you shouldn’t plan on opening bank accounts.

While there may be a small number of banks that are still willing to open accounts for companies with bearer shares, this is typically reserved for very high-value clients or requires opening accounts at very low-quality financial institutions.

And in most cases, if the bank does open the account, they’ll require that the shares be transferred to an agent of the bank. In other words, you’re handing over the bearer shares to open a bank account.

Alternatively, if you find a financial institution that allows you to open accounts for a company with bearer shares and doesn’t require you to hand over custody of the shares — run in the opposite direction.

Not surprisingly, financial institutions willing to do this in today’s regulatory environment are typically in very low-quality jurisdictions, do not follow international standards, and are likely going to cause a lot of headaches in the long term.

Why Hold Bearer Shares?

With everything discussed so far, it’s hard to imagine a situation where bearer shares make sense.

In fact, given the global obsession with transparency and increased regulation, the few remaining benefits will fizzle out and cease to exist.

Yet, some people persist, choosing to hold bearer shares in foreign companies in an attempt to achieve certain “benefits”.

So, let’s take a look at what these misguided benefits might include:

• Anonymity
• Transferability

Surprised it isn’t a longer list?

Sure, we could have included tax evasion on there as well, but that’s not a benefit anymore… it isn’t the 1990s.

Bearer shares fall into the same category as anonymous bank accounts in terms of taxes — both are forms of lazy tax planning.

If you own shares in a company, bearer, or registered, and you profit from those shares, you have to report and pay tax.

Now, if you live in a low (or zero) tax country you may have no tax liability, but that’s because of your residency, not how you choose to hold shares.

Plus, there are 100% legal ways to capture almost all of the benefits that people think they can get from bearer shares. So, why rely on old-school tactics if you don’t have to?

Now, let’s take a look at some alternatives and what people use today instead.

Alternatives to a Bearer Share

Frankly, it’s time to get comfortable with greater transparency. And, if you’re trying to achieve some of the objectives that bearer shares previously offered, there’s a strong chance that 100% legal alternatives already exist — you just need to know where to look and how to find them.

1. Anonymity (or Privacy)

If you’re after true anonymity, you’re a few decades too late. That game is over. Today, the name of the game is residency and structuring… or crypto.

Now, that doesn’t mean that achieving a certain level of privacy is out of the question. In fact, if you want to make sure your name isn’t splashed all over the internet or in public databases, that’s pretty easy to do with the right approach.

For instance, privacy-loving folks could protect themselves with the following possible options:

1. By registering companies in countries that do not have a public registry of shareholders — though this is starting to be phased out in many countries.
2. By holding interests (shares) indirectly through private trusts or foundations where the ultimate beneficial owners are not disclosed publicly.
3. By using a combination of trusts or foundations, along with companies registered in countries that allow for privacy, along with nominee directors.

Of course, in most cases, there will be a private registry of the ultimate beneficial owners in all three of the above cases, with some exceptions for trusts in certain jurisdictions.

But, the point is, that options like the ones above would result in the personal details of the ultimate beneficial owner not being disclosed publicly, as long as the correct jurisdictions are used.

2. Transferability

Sure, one of the major benefits afforded by bearer shares is the ability to transfer shares without any effort. And, if this is a major interest, immobile bearer shares might be attractive to you.

But remember, you’ll still have to register the new owner with the agent anyway. And, on top of that, the chances of opening a bank account for the company are basically zero.

That said, how difficult is it to actually sell a company? Well, that ultimately depends on the country where the company is registered.

In many instances, companies can be sold without any tax trigger, stamp duty, or transfer tax. At most, there will be a small fee charged by the corporate registrar and a service provider to update the beneficial owner.

3. Closing Thoughts on Alternatives

Fortunately, with careful planning, privacy and transferability can be achieved. In fact, most countries that still have private company registries (for now) also make the buying and selling of shares incredibly simple.

So, whether you already own a company or you’re considering setting up a new company, you should think about whether bearer shares make sense anymore. We don’t think they do.

Instead, companies with registered shares are (and will continue to be) better positioned to meet the increasing demands of compliance in the banking world. And those entrepreneurs and wealth owners who insist on holding bearer shares (instead of registered shares) risk being cut off from the financial world entirely — if they haven’t been already.

Frequently Asked Bearer Shares Questions

Below are a few of the most common questions we receive from people exploring bearer shares and banking. If you have further questions about online offshore banking, don’t hesitate to contact us directly.

Are Bearer Shares Still Legal?

Yes, bearer shares are still legal in certain countries. However, the list of countries where bearer shares are permitted is dwindling. Additionally, if you are looking to open a bank account for a company with bearer shares, you’re going to have a very difficult time. In fact, it will almost be impossible. This is because the financial industry has turned its back on bearer shares, thanks in large part to regulatory pressure.

Why Are Bearer Shares Illegal?

Bearer shares are not illegal. However, many jurisdictions have banned the use of bearer shares due to the result of illegal activity including tax evasion and money laundering.

What Are the Disadvantages of Bearer Shares?

The main disadvantage of using bearer shares for ownership in an offshore company is that is extremely unlikely that the company will be able to open a bank account. In other words, the company itself can be registered and will exist as a legal entity, but it will not be able to send or receive transactions. In most cases, this renders the company useless and defeats the purpose of registering the company in the first place.

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