Dematerialisation of securities in the UK: what it means and why it matters.

Written by Sam Tyfield, Partner at Shoosmiths

Dematerialisation is the process of converting physical securities, such as share certificates or bonds, into electronic form. This means that investors no longer need to hold or transfer paper documents to prove their ownership of securities. Instead, they can use a digital ledger or a central securities depository (CSD) to record and manage their holdings. Why is the UK moving towards dematerialisation?

The UK government has announced its intention to dematerialise all securities issued by UK companies and traded on UK markets by 2025. This is part of its wider plan to modernise the UK's financial infrastructure and align it with international standards. The main benefits of dematerialisation are:

·      it reduces the risk of fraud, theft, loss or damage of physical securities

·      it lowers the cost and complexity of issuing, trading and settling securities transactions

·      it improves the efficiency and transparency of the securities market and the corporate governance of issuers