In principle, shares can be issued as bearer or registered shares. In the case of bearer shares – as the name indicates – the respective holder is the beneficiary of the security; in the case of registered shares, on the other hand, the person whose name is entered in the share register is the holder. The German Stock Corporation Act generally allows both options. Only when not fully paid-up shares are issued, registered shares are mandatory by law. In practice, however, most listed stock corporations issue bearer shares because they are less complex, can be transferred more easily in legal terms and are therefore better suited for stock trading.
Registered shares – entry in the share register
While companies with registered shares tend to be the exception in Germany, this is not necessarily the case in other countries. They are the rule in the United States, Great Britain and Japan. In recent years, however, large listed companies in Germany have also made increasing use of this form of share. Well-known stock corporations that have converted to registered shares are, for example, BASF, Adidas, K+S or E.ON. Almost half of the DAX shares are now based on registered shares, but the proportion is significantly lower for the remaining listed companies.
In the case of registered shares, the shareholders are recorded by name in the so-called share register – formerly the share ledger. Nowadays, it is kept in electronic form. The shareholders are entered in the share register with the number of shares or the total nominal amount, their name, date of birth and address. If the shares change owners, this must be recorded in the share register. In regard to the stock corporation, only the person who is entered in the share register is considered a shareholder. Registration is therefore an essential prerequisite for executing shareholder rights.
Limited fungibility – only in rare cases
Registered shares are legally regarded as order papers that can be transferred by agreement, endorsement and transfer. In principle, they are also suitable for stock exchange trading, although the required registration by name represents a theoretical disadvantage compared to bearer shares. This tends to make the transfer more difficult and fungibility more limited. With electronic settlement, however, these disadvantages have in practice lost considerable importance. Today, the correction of the share register is carried out automatically and almost simultaneously with the execution of the order. Collective safe custody is also possible, just as with bearer securities.
A special form are registered shares with restricted transferability. In their case, the transfer additionally requires the consent of the stock corporation. This actually complicates fungibility. Registered shares with restricted transferability are issued in order to prevent unwanted potential purchasers from acquiring shares. They are particularly important for companies in the defence and aviation industries and are in some cases required by law. The most important example are the Lufthansa shares.
In the case of share orders and safe custody, it is usually irrelevant whether the shares are bearer or registered ones in terms of cost. In this case, you can therefore also use our broker comparison calculator to determine the cheapest provider for you. However, in the case of registered shares, there is sometimes an additional – low – transfer fee charged for the change in the share register.