Bearer Form - Explained
What is a Bearer Form?
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What is a Bearer Form?
A bearer form describes a security, financial instrument, or negotiable instrument that has no owner of record. When security such as a bond or share which is payable to its bearer is not registered in the corporations book of the issuing company, it is a bearer form. A bearer form is also used in the context of a negotiable instrument such as check or banknote that is not payable to a specific payee. Bearer forms are payable to whoever is in possession of them or whoever tenders them with no record of the owner.
A Little More on What is a Bearer Form
The issuers of bearer form securities have no amount or record of who owns them. However, this absence of a record does not stand in the way of such securities being traded. The person in physical possession of bearer forms receives payments, despite that there is no evidence of ownership. The physical bearer of this security or negotiable instrument has the right to transfer the ownership to another party, this requires no record or documentation, all it requires it the physical transfer of the bearer certificate or negotiable instrument.
Securities issued by a corporation can be in two forms, either in bearer form or registered form. Registered securities have information or records in the corporation's book while bearer forms have no record whatsoever. Given that corporations have the records of the owners of registered forms, payments are made to them directly. But in the case of bearer forms, the physical bearers of such securities or negotiable instruments are presumed to be the owners, the securities are payable to them. Bearer forms are commonly used by issuers who do not want to disclose their identity, thereby remaining anonymous. They offer bearer forms certificates which are payable to the holders of the instruments.
Two types of bearer forms certificates exist, these are;
- Bearer bond certificate: This is also called a coupon bond where payments are made to whoever is in possession of the bond certificate.
- Bearer stock certificate: This is a negotiable instrument payable to the holder. The person in physical possession of the bearer stock certificate has all the legal rights associated with the stock.
Certain jurisdictions, states, and countries prohibit bearer forms because of the tendency of individuals to use them for money laundering, tax evasions and other forms of fraudulent acts.
- Commercial Paper (Intro)
- What is Commercial Paper?
- Negotiable Instrument
- What are the common types of commercial paper?
- Promissory Note
- Cashier's Check
- Convenience Check
- Certified Check
- Substitute Check
- Bill of Exchange
- Bank Draft Definition
- Sight Draft Definition
- Bankers Acceptance
- Who is a Holder of a negotiable instrument?
- Commercial Paper Funding Program
- What is Negotiability and why is it important?
- What is required for commercial paper to be negotiable?
- Sum Certain (Contracts)
- Inflation Adjustment Clause
- When does commercial paper contain an Unconditional promise to pay?
- Backup Line of Credit
- What is Payable on Demand or Payable on Time?
- What is Order Paper and Bearer Paper?
- Bearer Form
- How is a payee identified on the negotiable instrument?
- What rules does the court apply in determining negotiability?
- How is commercial paper negotiated to a holder?
- What is Transfer of a negotiable instrument?
- What is Indorsement of a negotiable instrument?
- What are the various types of indorsement?
- Bank Endorsement
- Blank Endorsement
- Accommodation Endorsement
- How does a holder receive payment on a negotiable instrument?
- Who is potentially liable on (or obligated to pay) a negotiable instrument?
- When is an individual liable for a representative signing a negotiable instrument?
- What rules apply if a holder loses a negotiable instrument?
- When is payment of a negotiable instrument overdue?
- What effect does a negotiable instrument have on the underlying obligation?
- What is a holder in due course?
- What are the requirements for a holder to become a holder in due course?
- Receive an instrument for value?
- Receive an instrument in good faith?
- Receive an instrument without notice of a valid defense?
- How does discharge of the Underlying Obligation affect a holder in due course?
- What is the Shelter Rule?
- Can you limit a transferee from becoming a holder in due course?
- Personal Defenses?
- Real Defenses?
- What is a Claim in Recoupment?
- What are the rights of a holder in due course if the instrument involves a consumer transaction?
- What happens if a negotiable instrument is Forged?
- What happens if a negotiable instrument is Stolen?
- Guaranty or Guarantee
- Letter of Guarantee
- Personal Guarantee
What is the role of a Guarantor or Surety of a negotiable instrument?
- Accommodation Paper Definition
- Secondary Liability
- Avalize Definition
- What is an Accord & Satisfaction?
- What is primary and secondary liability on an instrument?
- What is Drawer or Maker Liability for a negotiable instrument?
- What is Transferor Warranty of a negotiable instrument?
- What is Indorser Warranty of a negotiable instrument?
- What is Presentment Warranty of a negotiable instrument?
- What is a warrantors liability for a dishonored note or draft?
- What is the time limitation for warranty of a negotiable instrument?
- When are the warranties of a negotiable instrument discharged?