Abolition of Bearer Shares at Archers Corporate Service

The UK’s Small Business, Enterprise and Employment Act 2015 received Royal Assent on 26

March 2015, and makes important changes to the law applying to UK companies. Among

other things, the new law is designed to address the government’s key “Transparency and

Trust” proposals, aimed at deterring illegal activity such as money-laundering and tax

evasion.

One of the most significant changes is the abolition of the bearer shares. Section 26 and

Schedule 4 of the 2015 Act stated that the abolition of the bearer shares and it will take

effect from 26th May 2015.

Although at present, it is still possible for a company to issue bearer shares before 26th May

2015. But the issue of new bearer shares will be prohibited after the enforcement of the

legislation, and holders of existing bearer shares will have nine months grace period to

surrender the shares to the company for conversion into registered shares such as ordinary

shares.

The provisions of the Act also requires all companies with bearer share class must give notice

to the holders of bearer shares of their conversion rights within one month of these provisions

entering into force, and again before the final month of the nine months grace period.

The notice must be made available on the company’s website (if any) and published in the

Gazette. If any bearer shares are not surrendered for conversion before the end of the grace

period (by 25th February 2016) the company will be required to apply to court to cancel the

bearer shares or to pay the nominal share value to the court.

Companies which make provision for bearer shares in their articles will be able to remove

these provisions without the shareholders passing a special resolution. A copy of the

amended articles would have to be filed at Companies House.

The key dates and time frame:

By 26 May 2015 – No more new bearer shares can be issued.

By 25 June 2015 – Companies have a bearer share capital must notify holders of the bearer shares of their right to surrender the bearer shares for conversion into registered shares (ie. Ordinary shares).

There is nine months grace period from the 26 May 2015 to surrender and convert the shares.

By 25 December 2015 – holders of the bearers shares must suspend their voting right or to receive any dividends.

By 25 January 2016 – the companies must notify any remaining holders of the bearer shares their right to surrender the bearer shares for conversion into registered shares.

AFTER 25 February 2016 – Grace period ends and the full abolition applies. The holders of bearer shares must apply to the court for the cancel.

Thanks Aleksandrs Butans www.archerscs.co.uk