Which statement correctly describes bearer form?

Which statement correctly describes bearer form?

• A. Paper certificates are still the standard for all trades.
• B. Registered form is when ownership passes by transfer of the share certificate.
• C. CREST settlement operates on T+3.
• D. Bearer form is when the owner of the shares is the bearer and ownership passes by transfer of the share certificate.

Answer: (D)

Bearer form means the owner of the shares is the person who holds the physical share certificate, and title passes simply by delivering that certificate to the buyer (often with endorsement if required). There is no automatic update of the company’s records to reflect ownership; the certificate itself is proof of entitlement. This contrasts with registered form, where ownership is recorded in the company’s register and transfers occur by updating that register, not merely by handing over a certificate. Understanding this helps you see why the statement describing bearer form as ownership passing by transfer of the share certificate is correct: the certificate is the bearer’s proof of ownership, and transfer is effected through delivering that certificate. The other statements aren’t accurate in modern practice: paper certificates aren’t the standard for all trades today, as many markets have moved to electronic or dematerialized systems; in registered form, ownership passes when the transfer is registered in the share register, not by simply transferring the certificate; and the current settlement cycle in the UK market has moved toward shorter frames than T+3, with T+2 being common, so that CREST settlement on T+3 is not correct.

Bearer form means the owner of the shares is the person who holds the physical share certificate, and title passes simply by delivering that certificate to the buyer (often with endorsement if required). There is no automatic update of the company’s records to reflect ownership; the certificate itself is proof of entitlement. This contrasts with registered form, where ownership is recorded in the company’s register and transfers occur by updating that register, not merely by handing over a certificate.

Understanding this helps you see why the statement describing bearer form as ownership passing by transfer of the share certificate is correct: the certificate is the bearer’s proof of ownership, and transfer is effected through delivering that certificate. The other statements aren’t accurate in modern practice: paper certificates aren’t the standard for all trades today, as many markets have moved to electronic or dematerialized systems; in registered form, ownership passes when the transfer is registered in the share register, not by simply transferring the certificate; and the current settlement cycle in the UK market has moved toward shorter frames than T+3, with T+2 being common, so that CREST settlement on T+3 is not correct.