A bearer share or bearer stock is a certificate of ownership in a publicly traded company which is not registered under its holder’s name in the company’s share register.
Instead, ownership of bearer shares is recorded by the brokers through which bearer shares are purchased and by custodian banks which administrate bearer shares.
Dividends paid out by companies on payable dates is distributed to bearer share holders through custodian banks or brokers, which also provide shareholders with proof of ownership of shares for tax purposes and to enable them to attend annual general meetings (AGMs).
Issuing bearer shares relieves companies of the administrative burden of tracking every transaction in share ownership and allows for greater liquidity in capital markets. However, it also poses a disadvantage to companies because it makes them more vulnerable to hostile takeovers.