Abolition of bearer shares
Companies can no longer create and issue bearer shares under section 84 of the Small Business, Enterprise & Employment Act 2015 (the “Act”). A nine-month transitional period commenced on 26th May 2015, allowing bearer shareholders to surrender and convert their bearer shares into registered shares.
What are bearer shares?
Bearer shares are unregistered shares whose ownership is evidenced by physical possession of the relevant share warrant.
Since 26th May 2015, companies have been under an obligation to give notice to any shareholders who held bearer shares in the first month of the surrender period (i.e. until 26th June 2015) and one month before the expiry of the surrender period (i.e. 26th January 2016), informing them of their rights to surrender any bearer shares. Failure of a company to give such notice to bearer shareholders by 26th January 2016 constitutes an offence for the company’s officers.
Failure to surrender
From 26th January 2016, any agreement to transfer bearer shares will be void. All rights attaching to the bearer shares are also to be suspended. However, if bearer shares are surrendered after 26th January 2016 but before 26th March 2016, the suspension will be lifted and all dividends and/or other distributions will be paid to the bearer shareholder. This is to incentivise the surrender of bearer shares.
Cancellation procedure for bearer shares
In the three months following the expiry of the surrender period (26th March 2016 – 26th May 2016), companies with remaining bearer shares must apply to the court to cancel those shares. The remaining bearer shareholders must be notified of this application within 14 days.
The Registrar of Companies must be notified immediately. Failure to make the application and/or give notice will constitute an offence by the company and its officers. The court must only grant a cancellation order once it is satisfied that the company has fulfilled the notice requirements for the surrender of bearer shares in the three months following the surrender period. If the court is not satisfied that a company has fulfilled the notice requirements, it can grant a suspended cancellation order. Where the court has granted a suspended cancellation order, the company is required to notify the bearer shareholder. The bearer shareholder then has two months’ grace to surrender the bearer shares.
When shares are cancelled by a cancellation order or a suspended cancellation order, companies are required to file documentation with the Registrar of Companies. This includes a copy of the order and a statement of capital. Within 14 days of the cancellation date, the company must pay to the court the nominal value of the cancelled shares and any premium paid on them, as well as any dividends accrued since the rights attaching to the shares were suspended.
What does this mean for my business?
A company with issued bearer shares will be unable to make an application for striking off.
The Act allows a company to amend its articles of association to remove provisions authorising the issuance of share warrants without the need for a special resolution.
A company must have transferred bearer shares within the nine-month period of surrender. The company and its directors will have committed an offence if they have not given the requisite notice to bearer shareholders.
Identifying whether your company has any bearer shares.
Ensuring that any bearer shareholders have been given notice of the transfer/conversion requirements.
Having an awareness & understanding of the consequences of non-compliance.
How rradar can help: