Bearer instrument

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A bearer instrument is a document that indicates that the owner of the document has title to property, such as shares or bonds. Bearer instruments differ from normal registered instruments, in that no records are kept of who owns the underlying property, or of the transactions involving transfer of ownership. Whoever physically holds the bearer bond papers is assumed to be the owner of the property. This is useful for investors and corporate officers who wish to retain anonymity, but ownership is extremely difficult to recover in event of loss or theft.

In general, the legal situs of the property is where the instrument is located. Bearer instruments can be used in certain jurisdictions to avoid transfer taxes, although taxes may be charged when bearer instruments are issued.

Under the Uniform Commercial Code, a negotiable instrument (such as a check or promissory note) that is payable to the order of "bearer" or "cash" may be enforced (i.e. redeemed for payment) by the party in possession. The payee (i.e. the person named in the "pay to" line) may also convert an instrument into a bearer instrument by endorsing (signing) the back. This is the letter of the law. In practice many merchants and financial institutions will not pay a check presented for payment by anyone other than the named payee.

In earlier times many forms of government issued currency were actually bearer instruments giving the bearer property title to precious metals[citation needed][dubious ].

Bearer shares are banned in some countries, because of their potential for abuse.[1]

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  1. ^ David Leigh, James Ball, Juliette Garside and David Pegg, "Catalogue of malpractice endorsed by bankers laid bare in HSBC files," The Guardian (Sunday 8 February 2015). Retrieved 10 February 2015.