IHTM27150 - Locality of assets (situs): share certificates endorsed in blank

Certificates of many American and Canadian railroads and of certain other companies have a printed form of transfer and/or power of attorney endorsed, which enables the certificates, when the form is signed by the registered holder of the shares, to be transferred by delivery.

It is common practice for such certificates to be “endorsed in blank”, i.e. for the endorsement to be signed by the registered owner as transferor, the name of the transferee being left blank.

Dividends are paid by the company to the registered owner, and if these shares have in fact changed hands by delivery, the beneficial owner for the time being recovers his dividends from the registered owner.

Usually the shares are registered in the name of a recognised broker, bank, discount house, etc, known in England as a “good Marking Name” or, in America, as a “Street Name”. This helps to make sure that the purchaser receives their dividends with minimum of trouble and risk.

A list of good Marking Names recognised by the London Stock Exchange is printed in the Stock Exchange Official Year Book.

However the beneficial owner can have them registered in their own name, or in the name of some nominee other than a good Marking Name.

The local situation of shares for Inheritance Tax purposes is determined as followings:

• If the registered owner is a good Marking Name, the shares are situated where the register is kept, not where the certificates are found. If the company has more than one register on which the holding could be effectively transferred, and the share certificates are found at the material time at a place where a register is located, the holding is for Inheritance Tax purposes situated at that place - see R v Williams [1942] AC 541. Cases where none of the effective registers is located where the certificates are found must be referred to TG or your Team Leader, in Scotland.
• If the registered owner is the beneficial owner himself, or a nominee of the beneficial owner, or, in the case of settled property, the trustees of the settlement or their nominees, the rules are as at (a) above.
• In such cases it is considered that the legal and only title of the holder consists in his registration as owner. By bringing the certificates to the UK he is in a position to create, in a purchaser, an equitable interest in the shares which would be situated here, but until he does so the beneficial interest has not been severed from the legal interest so as to have a different locality.
• If the registered owner is neither a good Marking Name, the beneficial owner, nor any other of the persons named at (b) above, and the certificates are physically present in the UK at the material time, the shares are locally situated in the UK for Inheritance Tax purposes, (Stern v The Queen [1896] 1 QB 211).

Certificates of this kind, not containing any express obligation or promise, are not specialty ( IHTM27079) debts - see the Williams case at [1942] AC 556.