The scope of the digital register model to be implemented in step one will encompass UK incorporated companies’ shares that are admitted to trading on a UK regulated market (such as the Main Market of the London Stock Exchange) or SME growth market (such as AIM) (together, UK Traded). The Report notes that special treatment should apply to shares held on an overseas branch register and shares that are subject to restrictions under Category 3 of Regulation S of the US Securities Act of 1933.

The regime would not apply to, for example, UK Traded warrants, debentures or debenture stock, non-UK Traded classes of shares, or securities of non-UK incorporated companies. For the avoidance of doubt, it should also be noted that the digital register model will not apply to shares held in CREST – only to shares held in certificated form under the current rules.

Where shares cease to be UK Traded, it is proposed that the digital register model would continue to apply to them for a transitional period of two years (or, if earlier, until a special resolution disapplying its application is passed by the company’s shareholders).

These will no longer constitute evidence of title to shares that fall within the scope of the digital register regime. Instead, ownership will be recorded solely on the company’s digital register of members. Shareholders will not be required to return or destroy their paper certificates.

It is intended that standards for the operation of digital registers will be developed collaboratively by industry participants and published around summer 2027. The Report recommends that these should be endorsed by the government once they are satisfactorily developed, in order to set an expectation that they should be adhered to.

The statutory instrument to implement step one should mandate that shareholders are able to access their holdings through online portals (the Report notes that the existing shareholder portal capabilities provided by many registrars should already satisfy this requirement) and also give issuers (and registrars) a statutory right to refuse to register a transfer where they are unable to verify the identity or authority of a person submitting transfer instructions.

An indicative processing proposal for dematerialisation under the digital register model is included in Appendix 2 to the Report and covers, among other things, the minimum information to be included in digital holdings confirmations.

Yes - the Report recommends that the laws governing share transfers (including the Stock Transfer Act) should be updated to allow this to be done digitally and to expressly provide for the use of electronic signatures. The general position would be that issuers and their registrars would retain discretion on whether digital or physical processes should be deployed and that the use of paper processes should not be limited to vulnerable or digitally excluded persons. Appendix 2 to the Report includes an indicative processing proposal covering, among other things, a proposed process for transfers in the absence of share certificates and physical transfer documentation.

The Report also notes that consideration will need to be given to how transfers of shares held on digital registers are processed from a stamp duty and stamp duty reserve tax (SDRT) perspective. In this context it recommends that, ideally, the digital register model would be introduced at the same time as the planned introduction of a new securities transfer tax to replace stamp duty and SDRT, although the Report considers the implications of introducing digital registers in advance of such reforms.

Appendix 3 to the Report sets out illustrative corporate action arrangements under the digital register model resulting from step one, including in relation to further share issues (including rights issues and open offers), demergers, takeovers (by way of scheme or offer), and redemptions and conversions. While the Report notes that fuller use of electronic communications and digital solutions should continue to be encouraged, it is not envisaged that paper documentation will cease to be required in connection with such actions as a result of the implementation of the digital register model. As such, no material changes are expected to the way transactions are conducted during step one. 

The Report recommends that the statutory instrument implementing step one should be designed to override contrary provisions in companies’ articles of association, meaning that there would be no mandatory requirement to amend them. 

However, it is recognised that companies may still wish to voluntarily update their articles to align with the new regime. In this context the Report recommends that an industry working group (led by the GC100) should be convened to develop model provisions and associated guidance to enable companies to prepare resolutions for their next annual general meeting following the implementation of step one.

The Report notes that companies and registrars will need to consider revising registrar engagement terms but that this should remain a commercial arrangement between each issuer and its registrar. As such it does not recommend the preparation by industry of model or template engagement terms.

The Report considers issues relating to security arrangements over shares (for example, as collateral for a loan) and notes that DEMAT intends to undertake a further sounding exercise with the lending community in this context.

The Report also discusses the issue of preventing shareholders from accepting more than one competing takeover offer in respect of the same shares in the absence of paper certificates and notes that this is an area to be addressed by the UK Takeover Panel.

Appendix 5 to the Report sets out preliminary observations on various measures relating to steps two and three. These are intended to facilitate discussion and inform next steps – they are not the subject of final recommendations at this stage. They will be worked through and resolved in DEMAT’s second report, expected to be published in summer 2027.

Some of the topics covered in Appendix 5 include:

• An ability for out of scope issuers to opt-in to the digital register model.
• Requiring shareholders to provide issuers with their email address (or another form of digital identity or electronic messaging solution) and their bank account details.
• Fast tracking (to the extent possible) the move to a fully digital shareholder communication and payments model. Shareholders would retain an option to request to receive hard copy communications (but not to receive cheque payments).
• Backstop arrangements for residual shareholdings at any step three sunset date. It is noted that the detail and design of any backstop mechanism will require further work, including detailed consideration of the legal, regulatory, operational, tax and potentially consumer duty implications of each option.
• Ensuring key legal rights accruing to non-CREST shareholders are effectively accessible to ultimate beneficial owners (either directly or through the intermediated securities chain).
• Cost allocation of the transition to the intermediated model.
• Interoperability with tokenisation initiatives.