Abolition of Bearer Shares
The Small Business, Enterprise & Employment Act 2015 (“SBEE”) received Royal Assent on 26th March 2015. The Act’s first change from a company law perspective is the abolition of bearer shares which comes into force on 26th May 2015. For any company which has, or thinks it has, bearer shares in issue, it needs to take appropriate action quickly as there is only a nine month window during which to act.
Bearer Shares are unregistered shares that are owned by whoever physically holds the share warrant to them. These shares can be held anonymously as no one is entered in the company’s register of members. Bearer Shares are considered to enable the concealment of persons exercising significant control over a company and go against the current stated drive for greater corporate transparency.
As of 26th May 2015, bearer shares will be abolished. There is to be a nine month transitional period during which bearer shareholders should surrender their existing bearer share certificates and convert them into registered shares.
There is a formal procedure set out in Schedule 4 of the SBEE which sets out the process that companies must follow, including the requirement to communicate with their bearer shareholders in order to tell them about the changes, before a court cancellation process is embarked on.
In order to assist you, we have produced a package of documents for companies who have bearer shares in issue and need to take action. This includes:
• A first & second notice to shareholders informing them of their right to surrender and convert their bearer shares and the consequences of not doing so;
• Shareholder acknowledgements that they have received the relevant notice and will surrender and convert their shares;
• Board minutes for companies with bearer shares;
• An ordinary resolution for companies needing to change their articles to remove references to bearer shares; and
• A letter to Companies House notifying them of the changes made.
Although bearer shares are now not often used in UK companies, they have been used in the past particularly by older companies and criminal sanctions will apply for both the company and its officers if they do not comply with the abolition provisions. All company secretaries or administrators who know (or think) that their company has ever issued bearer shares, must follow the process set out in the SBEE. This new sub-folder has been written with company secretaries/administrators or company directors in mind as well as other professionals such as accountants advising the boards of SME businesses.
The contents of this Newsletter are for reference purposes only and do not constitute legal advice. Independent legal advice should be sought in relation to any specific legal matter.