The Dematerialisation Market Action Taskforce (DEMAT) was established in October 2025 to deliver the UK’s plan for withdrawing paper share certificates and transitioning to fully digital share ownership. This report sets out the detailed implementation plan for Step 1, the withdrawal of paper certificates by late 2027, and provides early observations on Steps 2 and 3, which will modernise and ultimately replace the UK’s current shareholding system.

1. Purpose and Strategic Context

The report builds on the Digitisation Taskforce’s 2025 recommendations and forms part of the Government’s wider Wholesale Financial Markets Digital Strategy. DEMAT’s mandate covers:

1. • Step 1: Withdraw paper share certificates and introduce the digital register model.
   • Step 2: Improve the intermediated shareholding system.
   • Step 3: Transition all shareholdings into the intermediated model.
2. The Digital Register Model (Step 1)
   

   Scope
   The digital register model applies to UK-traded shares of UK-incorporated companies—those admitted to trading on a UK regulated market or SME Growth Market. Shares not publicly traded, warrants, debentures, and shares of non-UK companies are excluded. Special rules apply for overseas branch registers and Regulation S Category 3 securities.

   A transitional period applies for companies that delist or go private, avoiding the need to issue new paper certificates during corporate actions.

3. Key Measures for Step 1
   DEMAT identifies eight core measures to be implemented via a statutory instrument.
   
   1. Withdrawal of Paper Share Certificates
   Paper certificates will no longer constitute evidence of ownership. Section 768 of the Companies Act will be disapplied for in-scope shares. Holders may keep certificates as souvenirs, but they will have no evidential value as to ownership title. Ownership will instead be evidenced solely by the digital register.
   
   2. Modernising Share Transfer Requirements
   The Stock Transfer Act 1963 and Companies Act provisions will be updated to:
    - Allow digital transfer instructions.
    - Permit electronic signatures.
    - Override conflicting provisions in issuer articles.
   
   This modernisation aligns with HMRC’s planned 2027 replacement of stamp duty and SDRT with a single Securities Transfer Charge (STC).
   
   3. Operation of Digital Registers
   Representatives from EUI, shareholder associations and the issuer, registrar and broker communities will collaboratively develop Step 1 Operational Standards, expected to be endorsed by Government. Issuers must provide shareholders with online access to their holdings, transaction history, and personal register entries.
   Registrars will apply risk-based security protocols, but legislation will not prescribe specific security measures.
   Issuers and registrars will have a statutory power to refuse registration where identity or authority cannot be verified.
   
   4. Taking Security Over Shares
   The removal of paper certificates complicates traditional security arrangements. DEMAT will consult lenders and may propose legislative mechanisms enabling collateral-takers to enforce security using prescribed declarations or digital processes.
   
   5. Competing Takeover Offers
   Without paper certificates, shareholders could theoretically accept multiple takeover offers. DEMAT recommends Takeover Code changes enabling receiving agents to cross-check acceptances to prevent double-counting.
   
   6. Stamp Duty and SDRT
   Movements between digital registers and CREST will not trigger stamp taxes. However, digitised off-market transfers will require new processes for SDRT collection until the STC regime is introduced.
   
   7. Issuer and Registrar Preparatory Actions
   Issuers may voluntarily amend their articles to remove certificate references. GC100 will develop model provisions. Registrars will update engagement terms to remove certificate-related services.
   
   8. Awareness Campaign
   A major public campaign will explain Step 1 reforms, emphasising:
    - No need to return certificates.
    - No tax implications.
    - Fraud-risk awareness.
    - Support for vulnerable and digitally excluded investors.
   Civil society organisations such as Age UK and Citizens Advice will play key roles.
4. Implementation Timeline
   Step 1 will take effect in late 2027, with the exact weekend chosen to avoid:
    - T+1 settlement implementation (11 October 2027).
    - AGM season.
    - Dividend peaks.
   Draft legislation will be laid before Parliament in summer 2027.
   
   
5. Shareholder Experience Under Step 1
   The report provides detailed case studies illustrating how shareholders will interact with the digital register:
    - Digital Holding Confirmations (DHCs) will be available as factual statement of a holding at a point in time but will not constitute evidence of ownership.
    - Shareholders can sell via brokers using CREST stock deposits.
    - Off-market transfers (gifts, probate, transmissions) will use digital or physical processes with identity checks.
    - Although electronic access is expected to become the default, shareholders should be able to opt in to, or request, physical forms of delivery of communications.
   
   
6. International Interfaces
   Overseas Branch Registers (OBRs)
   Legislation will allow OBRs to hold both paper and digitised shares.
   US Regulation S Category 3 Securities
   Restricted securities will be out of scope of the digital register model.
   
   
7. Preliminary Observations for Steps 2 and 3
   These are not final recommendations but early views.
   Step 2: Improving the Intermediated System
   Key themes include:
    - Mandatory provision of shareholder email and bank details.
    - Digital-first communications and payments.
    - Enhanced rights for beneficial owners.
    - Inter-shareholder communication mechanisms.
    - Updating the Uncertificated Securities Regulations to support electronic contact and payment details.
   
   Step 3: Transition to the Intermediated Model
   A major challenge is handling shareholders who remain on digital registers at the sunset date. Options include:
    - Government-backed depository (ongoing administration).
    - Issuer-funded Corporate Sponsored Nominees (CSNs).
    - Government-backed depository with forced sale.
   
   Each option must consider property rights, market impact, KYC, and vulnerable investors.
8. Strategic Takeaways
    - Step 1 must be fit for purpose, proportionate and not over-engineered.
    - The digital register is temporary; the end-state is full intermediated holdings.
    - The reforms modernise UK capital markets, reduce friction, and improve investor protection.
    - Tokenisation initiatives must be aligned with the dematerialisation roadmap.
    - The programme is a once-in-a-generation modernisation of UK share ownership infrastructure.