Knowledge bank
The knowledge bank is a searchable facility which gives access to ICSA's range of guidance notes, consultations and submissions and other publications.
Knowledge Bank: Policy
Dematerialisaton
Published: October 21st 2008
Dematerialisation is the working title that has been given to a project to extend the advantages of electronic share transfer to the millions of shareholders currently opting to receive share certificates.
Currently, when such ‘certificated shareholders’ wish to buy or sell shares the transaction has to be executed by means of a paper Stock Transfer Form (STF) which has to be presented, along with the paper share certificate, to the Broker. These documents are then forwarded through Crest to the company Registrar. The Registrar then sends new certificates back through the system to the Broker and on to the buying shareholder. Settlement of the transaction can take up to 10 days (T+10). Under an ‘electronic’ system no STF would be required, the transfer would be processed electronically in minutes and settlement would be achieved in a maximum of 3 days (T+3).
The Government have given their support to the project and the Companies Act 2006 included provision whereby Dematerialisation could be implemented by Regulation as and when a workable process could be developed.
The proposal is being discussed and developed by a Reference Group (DRG) made up of representatives from all market participants e.g. Government departments, Brokers, Registrars, Issuers and Euroclear. A DRG Technical Working Group is developing a Technical Model outlining the process and seeking to identify and deal with all the details that will need to be addressed.
A DRG Timetable group has calculated that, ideally, a minimum period of 18 months, spanning two AGM seasons, will be required to implement the necessary system developments and carry out effective shareholder communications.
In September 2008 the DRG wrote to the Government requesting reassurance that the Government is still committed to the proposal and prepared to proceed with the necessary legislation. On receipt of that commitment, market participants will be able to schedule in the necessary system developments and agree an implementation date that all participants can then work towards.
To view the letter as a PDF please click here
To view the response from Paul Myners, please click here
A list of members of the Dematerialisation Reference Group can be found here
The full report for consultation can be found here
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