The End of the Paper Share Certificate

DEMAT Publishes Its Step 1 Implementation Plan

ShareSoc comment — July 2026

The Dematerialisation Market Action Taskforce (DEMAT) has published its first report: the UK implementation plan for the withdrawal of paper share certificates. It is a significant milestone in the modernisation of UK share ownership — and one in which individual shareholders have had a real voice, with ShareSoc’s Heather Benjamin sitting as a full member of the Taskforce throughout.

Where this fits in the bigger picture

The report is the product of a process that began with the 2022 Secondary Capital Raising Review and continued through the Digitisation Taskforce, whose final report in July 2025 recommended a staged, three-step move away from paper:

Step 1 — paper share certificates cease to be evidence of title, replaced by digital registers, before the end of 2027. Shareholders remain directly on the company’s register, exactly as now.

Step 2 — improvements to the intermediated (nominee) system, so that people who hold through platforms and brokers can receive information and exercise their rights.

Step 3 — only once those improvements are in place, all remaining directly-held shares transition into the improved intermediated system.

This report deals primarily with Step 1. DEMAT’s chair, Mark Austin, describes it as “a pit stop, not the destination”: a deliberately proportionate, low-disruption interim stage, with the heavier questions about the intermediated end-state reserved for DEMAT’s second report, expected in summer 2027.

Step 1 itself will be implemented by a Statutory Instrument under the Companies Act, with the digital register model taking effect in late 2027.

Why it matters, and who is affected

Immediately affected are the several million individuals who still hold shares in paper certificated form. Disproportionately these are longstanding, loyal retail shareholders, and often older investors. For them, the headline messages are reassuring ones. Nothing needs to be done at this stage: certificates do not have to be returned or destroyed, holdings carry over automatically to the digital register, and no stamp duty, SDRT or other tax charge arises from the change. Shareholder rights — dividends, voting, participation in corporate actions — continue exactly as before.

Every issuer will be required to give shareholders online access to their own holding and transaction history, and physical mailings will remain available to anyone who wants them, not just the digitally excluded.

Over the longer term, every UK retail investor is affected, because Steps 2 and 3 will reshape how all of us hold shares and exercise the rights that go with them. That is where the really consequential questions sit — and it is why ShareSoc fought hard to ensure that the Step 2/3 groundwork in this report reflects individual investors’ interests from the outset.

What is good about this report

There is a great deal here to welcome, the result of detailed, constructive analysis and work under Mark Austin’s lead:

Shareholder associations have a formal seat at the table. The report names shareholder associations — alongside Euroclear, issuers, registrars and brokers — as co-developers of the “Step 1 Operational Standards” that will govern how digital registers work in practice, to be published around summer 2027. That is direct, structural influence for the individual investor voice.

A clear warning against rushing into nominees. The awareness campaign guidance now cautions investors that if they move into a nominee before the Step 2 reforms land, their ability to exercise shareholder rights will depend on their intermediary’s contractual terms — and may be limited until Step 2 is implemented.

Investor protection is designed in. Registrars must apply security standards no weaker than today’s; issuers get a statutory power to refuse transfers they cannot verify; transaction alerts will flag activity on holdings; and the awareness campaign — delivered with Age UK and Citizens Advice — puts fraud warnings and accessible formats front and centre.

Digital communications by default, hard copy by right. The report is explicit that shareholders may opt for physical communications and processes through a clear, accessible process — and that this choice is not to be confined to “vulnerable” categories.

The direct-holding option survives into the end-state discussion. The final report’s description of the intermediated model now expressly preserves direct holding (for CREST participants) alongside nominee holding — a more accurate and more investor-friendly formulation than earlier drafts.

Momentum on shareholder communications. The Step 2/3 appendix now references a ShareSoc proposal for issuers to facilitate inter-shareholder communications: where a party demonstrates a “proper purpose” under section 116 of the Companies Act, communications would be routed to fellow shareholders through the issuer and intermediaries. Electronic communications should benefit investors, not just issuers and intermediaries.

An open mind on custody costs. Earlier drafting assumed that costs of a compliant custody service for direct holders would simply be “fairly allocated”. The final report instead asks the open question of whether such a service should incur a charge at all — a better starting point for shareholders as the Step 2/3 debate begins.

What needs watching

A milestone, then — but not the finish line. ShareSoc will be watching several areas closely as the process moves towards the Steps 2 and 3 report:

Shareholder rights under the intermediated model. This is the big one. The taskforce commits to setting out, in the next report, the extent of legal rights to be conveyed to ultimate beneficial owners behind nominees and other intermediaries. ShareSoc’s position is unambiguous: the rights that Parliament gave shareholders in the Companies Act 2006 — to call meetings, submit resolutions, circulate statements and hold boards to account — must remain effectively accessible to the individuals who ultimately own the shares. Anything less would weaken a vital check and balance in UK corporate governance.

Implementation runway. The report promises “sufficient advance warning” of the effective date but no longer specifies a minimum notice period after the draft Statutory Instrument is published. With the Statutory Instrument expected in summer 2027 and go-live in late 2027, the runway for less digitally-engaged shareholders could be tight. We will press for generous notice and unmissable communications.

Freedom of movement between registers. Any suggestion of an early “one-way street” — restricting shareholders from moving holdings out of nominees onto the digital register prior to Step 3 — should be resisted until the intermediated system improvements are delivered and proven.

Intermediary credit risk. Moving the entire shareholder base into intermediated holdings concentrates exposure to intermediary failure. ShareSoc believes the adequacy of the Special Administration Regime and FSCS arrangements must be reviewed as part of this process, and we will continue to make that case.

ShareSoc’s role

ShareSoc has been inside this process from the start. Heather Benjamin serves as a full member of DEMAT, alongside representatives of BP, Euroclear, Citi, Equiniti, Hargreaves Lansdown and Computershare. Hers is the only voice at that table whose sole purpose is to represent individual investors.

Through Heather’s membership, supported by three retail roundtables and by detailed review and commentary from ShareSoc’s policy team, we have ensured that the investor perspective is heard and understood, and that unresolved Step 2/3 questions are clearly identified and framed.

That engagement continues. The awareness campaign begins in the second half of 2026, the draft Statutory Instrument is expected in summer 2027, and DEMAT’s Steps 2 and 3 report — where the questions that matter most to individual investors will be decided — follows in summer 2027.

ShareSoc will be engaging vigorously at every stage, and we will keep members informed as each milestone approaches.

Members with questions about what the changes mean for their own holdings — particularly holders of paper certificates — are encouraged to get in touch via the Policy Committee.