Bearer Form – Definition

Cite this article as:"Bearer Form – Definition," in The Business Professor, updated April 16, 2020, last accessed October 22, 2020,


Bearer Form

A bearer form describes 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 corporation’s 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 cheque or banknote, this form states that the instrument is payable to the bearer regardless of the absence of the record of the owner.

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.

Reference for “Bearer Form”

Academics research on “Bearer Form”

Zero coupon bond arbitrage: An illustration of the regulatory dialectic at work, Finnerty, J. D. (1985). Zero coupon bond arbitrage: An illustration of the regulatory dialectic at work. Financial Management, 13-17. This paper provides an illustration of how structural frictions in the world capital markets can give rise to profitable arbitrage opportunities. It describes how a company realized an arbitrage profit by simultaneously issuing zero coupon Eurobonds and purchasing a cash matching portfolio of stripped U.S. Treasury bonds and identifies the market imperfections that created this opportunity.

[CITATION] The persistent borrowing advantage in eurodollar bonds: A plausible explanation, Marr, W., & Trimble, J. (1988). The persistent borrowing advantage in eurodollar bonds: A plausible explanation. Journal of Applied Corporate Finance1(2), 65-70.

The main characteristics of tax havens, Moerman, S. (1999). The main characteristics of tax havens. Intertax27(10), 368-375.

The Prose Narrative Repertoire of a Passive Tradition Bearer in a Welsh Rural Community (Part 2), Gwyndaf, R. (1981). The Prose Narrative Repertoire of a Passive Tradition Bearer in a Welsh Rural Community (Part 2). Fabula22(1), 28.

Inside the bank lending channel, Gambacorta, L. (2005). Inside the bank lending channel. European Economic Review49(7), 1737-1759. This paper tests cross-sectional differences in the effectiveness of the bank lending channel. The results, derived from a comprehensive sample of Italian banks, suggest that heterogeneity in the monetary policy pass-through exists. After a monetary tightening the decrease in lending is lower for well-capitalized banks that are perceived as less risky by the market and are better able to raise uninsured deposits. Liquid banks can protect their loan portfolio against monetary tightening simply by drawing down cash and securities. The presence of internal capital markets in bank holding companies also contributes to insulate monetary shocks. Bank size is never relevant.

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