Bearer Shares: perfect for hiding your ownership of a company, profits and wrong-doing. Available in your favourite tax haven, the UK

George Osborne, the chancellor, expressed shock: “I was shocked to see that some of the very wealthiest people in the country have organised their tax affairs, and to be fair it’s within the tax laws".
So, lets take a closer look at one of the provisions made available by Britain's legislators for the tax dodgers:


Many people have heard of "bearer bonds" - a favoured currency of bad guys in movies seeking larger payoffs. Fewer have heard of "bearer warrants", and fewer still of "bearer shares". There are many respectable reasons for bearer securities of the bond and warrant variety. They are as good as cash so long as they are not counterfeit (the same can be said of cash). Take a £10 note from your wallet, and you will find the words “I promise to pay the bearer on demand the sum of …”


Just as you don't have to prove the £10 note in your pocket actually belongs to you when you spend it, you don't have to prove the bearer security belongs to you - just having it is proof enough. The London Metal Exchange, highly regarded for its discipline and probity, runs its trading activities using bearer warrants. How else could several tonnes of copper be delivered by a man on a bicycle.


On the other hand, there are few respectable reasons for "bearer shares". The only reason for incorporating a company in this way is to disguise the ownership. And where in the world would such perfidy be allowed? Well, according to the Economist newspaper, Britain:

Britain (unlike most offshore locations) does not regulate company-formation agents. It even lets firms be founded with bearer shares, which, like cash, belong to whoever happens to have them with him at the time. Most countries have abolished these securities, under pressure from international financial regulators, but one British website offers same-day incorporation of a UK bearer-owned shell for a mere £142 ($227), within four to six hours.

The relevant legislation can be found in section 779 of the Companies Act

(1)A company limited by shares may, if so authorised by its articles, issue with respect to any fully paid shares a warrant (a “share warrant”) stating that the bearer of the warrant is entitled to the shares specified in it.

(2)A share warrant issued under the company's common seal or (in the case of a company registered in Scotland) subscribed in accordance with the Requirements of Writing (Scotland) Act 1995 (c. 7) entitles the bearer to the shares specified in it and the shares may be transferred by delivery of the warrant.

(3)A company that issues a share warrant may, if so authorised by its articles, provide (by coupons or otherwise) for the payment of the future dividends on the shares included in the warrant.

According to one of the purveyors of this kind of company:

As long as you do not have them in your possession at the time you are questioned, you can legally and truthfully say under oath, “I am not the owner of that corporation.” 

This is just one of the many hidey-holes available for those with a need to proffer their finances for inspection - either to the tax authorities, or to the voters. Hidey-holes that the author of HMRC's report on the General Anti-Avoidance Rule (GAAR) says "Such tax planning is an entirely appropriate response to the complexities of a tax system such as the UK’s."


Hand the 'bearer shares' to your accountant (they now belong to him), sign the declaration that you have no conflicting commercial interests, then take the shares back (they now belong to you). Like Eeyore, Winnie the Pooh's asinine companion, putting the burst balloon into the honeypot, "he takes it out again, and puts it in again, and takes it out again, and puts it in again."


The ownership of bearer shares are untraceable by anyone, from the tax man to your ex-spouse's lawyer. Richard Murphy, noted tax expert and director of the Tax Justice Network provides further information in his guest blog: click **here**.