On 11 July 2023, HM Treasury published an interim report produced by the Digitisation Taskforce, which was established in July 2022 as a recommendation taken forward from Mark Austin’s Secondary Capital Raising Review. The Taskforce aims to drive forward the full digitisation of the UK shareholding framework by eliminating the use of paper share certificates and, in general, seeking to improve the UK’s intermediated system of share ownership.
The interim report provides a set of potential recommendations for the government and seeks feedback across a number of key questions, ahead of the publication of a final report to be delivered within six months.
The potential recommendations are as follows:
- Legislation should be brought forward, and company articles of association changed, as soon as practicable to stop the issuance of new paper share certificates.
- The government should bring forward legislation to require dematerialisation of all share certificates at a future date, to be determined as soon as possible.
- The government should consult with issuer and investor representatives on the preferred approach to ‘residual’ paper share interests and whether a time limit should be imposed for the identification of untraced ultimate beneficial owners (UBOs).
- Intermediaries should have an obligation, as a condition of participation in the clearing and settlement system, to put in place common technology that enables them to respond to UBO requests from issuers within a very short timeframe.
- Intermediaries offering shareholder services should be fully transparent about whether and the extent to which clients can access their rights as shareholders, as well as any charges imposed for that service.
- Where intermediaries offer access to shareholder rights, the baseline service should facilitate the ability to vote, with confirmation that the vote has been recorded, and provide an efficient and reliable two-way communication and messaging channel, through intermediaries, between the issuer and the UBOs.
- Following digitisation of certificated shareholdings the industry should move, with legislative support, to discontinue cheque payments and mandate direct payment to the UBO’s nominated bank account.
The deadline for feedback to this interim report is 25 September 2023.