Bearer bonds or unregistered bonds are bonds that are not registered to a holder and do not identify a holder on the face of the bond. In other words, when a company issues bearer bonds, it does not register the buyer of the bonds when they are issued. Bearer bonds are unregistered. This means that the interest and principle for the bearer bond are due to whomever is in possession of the bond.
Think bearer bonds like cash. Whoever is in possession of cash is its owner. So if you found 10 dollars on the street, you could pick it up and be the owner of those 10 dollars. The same is true for bearer bonds. Since the issuing company does not register each bondholder with each bond, the ownership of the bond transfers with possession on the bond. That is why is important to secure bearer bonds in particular. If they were stolen, the thief could collect the interest payments. It is important to keep all bonds, especially bearer bonds, in a safe.
Registered bonds, on the other hand, are registered with the issuing company. Each registered bond is listed with the name and address of the bondholder in the company's bond record. Many registered bonds are not issued with certificates because the bond registration can be used for bond payment information. A certificate is often unnecessary.
Search for more articles about Bearer Bonds:
Back to Accounting Terms