Investor Event

Dematerialisation of Shares – Certificates to be Abolished

There are in excess of 10 million investors who hold their shares in paper certificated form. So today’s announcement by the Government is of interest.

Lord Frost set out the below points about getting rid of paper share certificates today as part of a Brexit regulatory review.

Dematerialisation of shares – Although the majority of shares are held in electronic form, a minority are held in paper form. It is more expensive and takes longer for holders of paper shares to trade them and there is a risk of certificates going astray. The Government will work with industry, regulators and shareholders in the medium term to determine the best mechanism for converting these paper shares into electronic form, while preserving the rights of existing shareholders.

The full document is here


This is not really new News. As I understand it, paper shares are being scrapped in 2025 anyway.

Dematerialisation” allows companies to issue securities without a paper certificate to evidence them. It also allows existing paper shares to be transformed into electronic holdings. The general trend towards holding shares electronically was formalised by EU legislation in the form of the Central Securities Depositories Regulation (“CSDR”).

The CSDR sets a deadline of 2023 for ceasing the issue in paper form of most new publicly traded securities and a deadline of 2025 for the dematerialisation of existing paper shares for publicly traded securities. Therefore, the CSDR affects individual shareholders who hold their shares directly through paper share certificates. These certificates will need to be replaced with an electronic form of holding shares.

Now that the UK has exited the EU, the CSDR requirements no longer apply.

However, regardless of the status of the CSDR in this jurisdiction, stakeholders have told us that dematerialisation is generally considered to be a positive step towards greater efficiency.

The issue was addressed by the Law Commission Review of Intermediated Securities, to which ShareSoc contributed. see


Cliff Weight, Director, ShareSoc

  1. Amin Mohammed says:

    We should not oppose the abolition of paper share certificates. However we should emphasise again the importance of having electronic ownership properly respect the rights of individual shareholders, in a way that nominee accounts do not do at present.

  2. Mark Bentley says:

    Given that personal CREST accounts have become virtually unobtainable, at reasonable cost, for individual investors, having a certificated holding is the only practical way that we appear on share registers and hence obtain full shareholder rights.

    It is therefore crucial that the Law Commission’s findings are addressed before certificates are abolished. BEIS must ensure that the Law Commission’s work is progressed ASAP and appropriate legislation introduced, so that beneficial shareholders obtain their full rights, irrespective of the mechanism through which they hold their shares.

  3. Mark Northway says:

    This is the perfect opportunity to address the disenfranchisement of beneficial owners that has accompanied the development of nominees in the UK. Regrettably reinstatement of shareholders’ rights is not currently on the BEIS agenda, although they are fully aware of the issues.

  4. rogerwlawson says:

    Thoroughly agree with all these previous comments. We need to pressure BEIS not to scrap share certificates before a “name on register” system is provided.

  5. Mark Bentley says:

    If BEIS don’t sit up & take notice pretty soon, I’m sure that the press would love a story about certificated holders losing their rights. A suitable quote from us could encourage those holders to write to their MPs. 😉

  6. David Nicholas Martin Starkie says:

    I believe that about 25% of over-75s never use the internet. Some of a younger age will live in areas with poor network coverage. I suspect few of these two groups own shares, but some will. How will they fair with dematerialisation? Is there not a presumption here that everyone engages with the internet and is comfortable doing so?

    • Mark Bentley says:

      Good point, David. There needs to be a readily available option to continue to receive paper communications (and vote using paper forms) for those who have difficulty with the Internet.


  7. Alan Selwood says:

    This is yet another move that disenfranchises certain members of the UK population by continued emphasis on ‘digital-only’.
    Cash payments get replaced by online payments and bank branches dwindle; renewal of driving licences and passports, etc becomes slow and laborious for those who do not apply digitally; shareholder rights get eroded by the emphasis on nominee accounts accessed online; personal Crest accounts become harder to obtain and at great extra cost, and are not available for ISA or SIPP holders; banks want to use online authentication methods for their services, and often make no effort to provide landline calls to those who (like me) frequently have 0% mobile network strength at home.

    I agree entirely that before share certificates are scrapped, proper methods should be provided, tested, and in place that ensure that shareholder rights are not only retained but enhanced.

  8. Richard Clarke says:

    I agree. The issue is not about whether pieces of paper are used as evidence of title but how the rights arising from ownership are preserved. There seems to be a widespread misunderstanding that equities are solely financial assets and a widespread failure of nominees to respect the wishes of the beneficial owners. (Where I have assets, like loan stock, which are overwhelmingly financial in nature I have no problem with the use of nominees/ trust systems where, inter alia, the systems for preserving non financial rights often work better than the more complex issues related to equity holdings.)

  9. John goddard says:

    Those that have share certificates should be able to keep them if they so wish.

  10. Cliff Weight says:

    The terms of reference for Sir Douglas Flint’s Digitisation Project aim to preserve members rights in the Companies Act Part 9, re information rights and voting rights, etc. So I don’t think Mr Goddard should be concerned on that account.
    He might end up with an entry on Crest rather than a paper certificate. In 10 years time we will realise that share certificates, like cheques, are not necessary for shareholder rights. I suspect that some will take longer than others to get comfortable with this.
    We can see no benefit in running two parallel systems, only unnecessary costs.

  11. John Goddard says:

    Thank you for your reply to my comment. I feel that holding a paper certificate has real value and it proves you have part ownership of a company that you are proud to support. Electronic words will not have the same appeal for me. Maybe company’s should support my line of thought, for the benefit of their share holders wishes?

  12. Mike says:

    Coming to this late. But with the current issues Polymetal International PLC is going through and UK share holders at risk of losing their shares because some brokers such as Hargreaves Lansdown refuse to issue paper certificates, so you have to sell at a reduced price. It just proved that shares held electronically through a broker or in a nominee account are never truly yours.
    How can you be forced by a non state actor to sell your property.
    Paper certificates represents true ownership. Period!

  13. Lynn Prosser says:

    For older people, holding a share certificate, serves as a proof and record of their ownership of shares.
    It is something tangible to remind them of what they own. For old and young alike, tangible proof of ownership
    reduces anxiety, which is an ever-growing problem in our society.
    Interaction with third parties is often expensive, and uncomfortable for older people. We hear regularly of
    digitised records being hacked, lost or stolen. In my experience, Directors running small and medium-sized companies enjoy some personal interaction with their share holders. This direct relationship needs to be
    Third parties have no responsibility towards share owners, and I suspect that they are the only people who
    will gain from the scrapping of share certificates. As far as I can see, there is no reason why share certificates cannot run alongside the digitised records, as they have done up until now.
    With electronic records alone, there is also more risk of third party fraudulent impersonation and manipulation
    of share-holders. Prevention of this danger may provide yet more work for the Government with cost to
    the tax-payer.

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