In our Article of 1st September 2025 – Digitisation Taskforce – Modernising the UK Shareholding Framework – we reported on the recommendations set out in the Final Report of the Digitisation Taskforce.
As a reminder, the Digitisation Taskforce’s focus is on the transition from paper-based to digital share processes, in particular, modernising the UK shareholding framework by eliminating paper share certificates, improving the intermediated system of share ownership and ultimately mandating the use of fully intermediated share ownership. We can now provide an update on progress since our 1 September 2025 Article and an important reminder of the implications of these reforms on small-cap companies.
In summary, the benefits of the digitisation of shares for small-cap companies include reduced administration costs for Issuers, removal of the friction caused by share certificates in the trading and settlement process and the ability to trade shares more quickly.
If you would like to discuss your organisation’s digital share register journey, then please don’t hesitate to contact the MSP Company Secretarial team here.
The Dematerialisation Market Action Taskforce
A key recommendation from the Digitisation Taskforce final report was to establish a “technical group” to work with industry stakeholders towards the transition from existing paper-based shares to a full digitisation of share registers (step 1). This technical group, the Dematerialisation Market Action Taskforce (DEMAT), has been tasked by the Government with making recommendations on the implementation of stage 1 of the Digitisation Taskforce’s Final Report, and is now underway.
The DEMAT is chaired by City lawyer Mark Austin. Registrars, along with other key market participants, are represented on the DEMAT committee. The registrars are advocating that, where possible, engagement with non-CREST shareholders should be through the respective registrars’ websites. It is expected that the DEMAT will produce its report on the implementation of stage 1 by the summer of this year.
The Government will then consider the report before introducing secondary enabling legislation.
For more information on the digitisation of shares, speak to MSP Company Secretarial.
Digitisation of shares actions to be taken now for small-cap issuers:
Shareholders need to take no action in respect of the initial digitisation of the share registers in 2027.
However, there are some actions that Small Cap Issuers can take now to start getting ready for digital share registers:
a) If you have not already done so, sign up to the web portal service offered by your registrars and publicise this to your shareholders. This will enable shareholders to digitally provide changes of address, email addresses for shareholder communications and bank mandates for the payment of dividends;
b) Encourage your shareholders to sign up to email notification of the availability of documents and information on the Company’s website;
c) Undertake, or refresh, your shareholder electronic communications exercise alongside your next standard shareholder mailing. This will reduce the future level of hard copy mailings that the Company will need to undertake.
d) If the Company pays dividends, encourage your shareholders to complete bank mandates. This will reduce the costs of dividend payments and provide a secure and timely receipt of funds by shareholders.
Benefits of a fully intermediated shareholding system:
As the digital transformation of financial markets gains pace, there will be clear opportunities and benefits for many organisations, particularly where digitisation provides a smoother, more streamlined approach to share register administration.
Benefits should include:
- The friction caused by share certificates in the trading and settlement process will fall away
- The lost share certificate process and associated costs will fall away
- Issuers will no longer have to bear many of the administrative costs of registrars
- Previously certificated shareholders will be able to trade their shares more quickly
- Investors will be able to manage their holdings, view portfolios, and trade from anywhere using computers or smartphones
The potential challenges of a fully intermediated shareholding system:
Moving to a fully intermediated shareholding system does have some logistical and financial hurdles, such as weakening company-shareholder connections and complicating access for overseas or vulnerable investors. Beyond the technical costs of upgrading registrar systems, the transition must also address the questions of the cost of custody fees for small holders and the process of cashing out untraceable owners.
Challenges may include:
- Companies, particularly those with many retail shareholders, may lose their close connection with their shareholders.
- Solutions will need to be found for overseas shareholders who may not be able to appoint an intermediary due to cross-border regulatory issues
- Holders of small numbers of shares may not find it economic to bear the cost of ongoing custody fees
- It may be necessary to “cash out” untraceable shareholders on full intermediation
- There will be development costs incurred in the redevelopment of registrar systems to implement digital share registers, which will be passed on to Issuers
- Protections will need to be put in place for digitally disadvantaged and vulnerable investors.
How MSP Company Secretarial and Share Registrars Limited can help
Share Registrars offers shareholders secure access to their register account, providing them with the ability to view their holdings, change addresses and dividend payment methods.
Share Registrars already hold clients’ share registers in a digital format. We can also provide clients with our increasingly popular online voting system for general meetings.
If you would like to discuss what digitisation means for you, please contact the MSP Company Secretarial team or our colleagues Peter Ronayne or Doug Armour at Share Registrars Limited.
Digitisation of Shares: Frequently Asked Questions
What is the Dematerialisation Market Action Taskforce?
DEMAT – the Dematerialisation Market Action Taskforce – was created to oversee the implementation of the Government’s digital strategy of the transition from paper share (certificated share) registers to a digital share register. DEMAT was created to liaise with industry and financial sector stakeholders to ensure the transition has a positive impact and identify any risks which may impair the transition. Mark Austin has been appointed to establish and chair the taskforce. For more information, see the Government release on DEMAT here.
What is the timeline for transitioning to full digitisation of shares?
The timeline is to ensure all paper or certificated share registers for in-scope companies have moved to digitised registers by the end of 2027. The process begins with the DEMAT consultation, which must report back to the government by summer 2026. The taskforce should then present a recommended go-live date and a roadmap for implementation that includes the industry stakeholders required to deliver.
What are the three steps towards the digitisation of shares recommended by the Digitisation Taskforce?
You can read our full article on the digitisation of shares here, but in short, the Digitisation Taskforce recommended 3 clear steps to a full digital transition:
- Step 1 details the removal of paper shares and the full digitisation of share registers. In the first phase, issuers will “no longer be permitted to issue physical share certificates”, and all shares will be processed through a digital register.
- Step 2 aims to make the intermediated system more transparent and accessible, particularly to retail shareholders, where traditionally participation and voting has been a challenging engagement process. The belief from the Taskforce is that a fully digital intermediated system will also reduce costs for issuers, however it remains to be seen what the transformation will cost and who will bear the brunt of this.
- Step 3 recommends that all shares are transitioned into the digital intermediate chain created in step 2. This may require additional legislation from the Government on the direction of flow for digital share registers. A “sunset date” has also been mooted to avoid a dump of dormant small shareholders clogging up digital share registers.
If you require any more information on the digitisation taskforce or the digitisation of shares, then please contact us here.
Other articles you may be interested in:
Digitisation Taskforce – Modernising the UK Shareholding Framework
Director ID Verification and Persons With Significant Control