What does the end of share certificates mean for you?
“Dematerialisation” sounds, to me, like something that could happen only in Star Trek, but it will be coming to the UK in 2025.
It’s less exciting than being beamed up by Scotty, but it’s important for a lot of Earthlings.
From 2025, many of your paper share certificates will become meaningless, as share holdings in listed companies will only be recorded in electronic format from then on.
No new share certificates for listed companies will be issued from January 2023. This will apply across the EU as well as in the UK, so your share holdings in the likes of Santander will be dematerialised by 2025 too.
And remember that investment trusts are listed companies, so the likes of F&C, Witan etc. will also be affected by this change.
The process of dematerialisation in the UK began 23 years ago when the CREST system was established by the Bank of England. As a result of CREST, both electronic (“uncertificated”) and paper shares exist for listed UK companies.
The existence of two types of shares can cause confusion and inefficiency, hence the desire to move to one type of share. However, a great number of retail investors prefer to hold their shares in paper form, and they will be most affected by the forthcoming changes.
Whilst paper share certificates will no longer be valid, your holdings will be unchanged – they will just be held electronically instead.
What is Happening Now?
A UK steering group for dematerialisation has been set up and they are going to contact those who hold paper shares. There is no guidance yet about how shareholders will be informed about the changes.
It is likely that the measures taken will be aimed at the majority of stakeholders, while the few that remain to be covered will have to be dealt with on a case-by-case basis.
What Should You be Doing Now?
It’s definitely a good time to make sure you have details of the shares you hold in paper form, and to ensure that you have records which you can share with your advisers and family, if required.
It may be sensible to consider voluntarily dematerialising your shares now, by holding them in a nominee account or on an investment platform, rather than holding them in paper form.
However, there may be costs associated with this change.
And in a world in which crime has moved on line, it’s important to know that dematerialisation is planned, but that there is no action necessary now.
Forearmed is forewarned.From 2025, many of your paper share certificates will become meaningless, following a process called 'dematerialisation' Click To Tweet