Key takeaways
Dematerialisation will be introduced in three stages
The phased approach gives issuers time to prepare before implementation.
No immediate changes to articles required
Issuers can wait for legislation and market guidance before making constitutional changes.
No action is currently required from shareholders
Existing certificated holdings will transition to the digital register automatically.
The UK has taken a further step towards removing paper share certificates from the capital markets.
On 14 July 2026, the Dematerialisation Market Action Taskforce (DEMAT) published its UK Implementation Plan for the Withdrawal of Paper Share Certificates. The government has accepted the recommendations and confirmed that legislation will be introduced to require publicly traded UK companies to maintain digital share registers and to remove paper share certificates as evidence of title.
The reforms are expected to take effect before the end of 2027, although the commencement date has yet to be confirmed. The reforms form part of the government’s wider programme to modernise UK capital markets by removing the inefficiencies associated with paper share certificates, reducing administrative costs and making it easier for investors to hold and trade shares.
What is changing? The three-step approach
The DEMAT report sets out a three-step programme for the digitisation of UK share ownership. The changes will be introduced through a statutory instrument under Part 21 of the Companies Act 2006.
Which companies are affected?
The digital register regime is expected to apply to shares in UK-incorporated companies admitted to trading on a UK regulated market such as the Main Market of the London Stock Exchange or a UK SME Growth Market such as AIM or the AQSE Growth Market. The detailed scope will ultimately depend on the legislation, but the reforms are expected to capture the majority of publicly traded UK companies.
Step 1 - digital register model
The first phase, expected to take effect in late 2027, will see paper share certificates withdrawn and replaced by a digital register model.
Shareholders who currently hold certificated shares will remain registered members of the company, but their ownership will be evidenced by the company’s digital register rather than by a paper certificate. This means that existing share certificates will become obsolete as evidence of title. There is, however, no need for shareholders to take any action to convert their holdings as part of this first phase. The transition will be managed by companies and their registrars, with shareholders being kept informed throughout the process.
The government has also made it clear that shareholder rights will be unaffected by the move to digital registers.
The practical impact of Step 1 will primarily affect shareholders who currently hold certificated shares. Most listed shares are already held electronically through CREST or via intermediaries and are therefore already maintained in digital form. The reforms are directed principally at removing the remaining paper-based holdings that sit outside the existing electronic settlement system.
Step 1 will also modernise the legal framework for share transfers, including by enabling electronic transfer instructions and electronic signatures.
Step 2 - reform of the intermediated system
The second phase focuses on improving the existing intermediated system, through which most shares are already held via brokers, banks, nominees and other intermediaries.
The aim is to improve the ability of underlying shareholders to exercise their rights and receive information effectively through intermediaries.
Step 3 - transition to the fully intermediated model
The final phase is the longer-term transition of shares held on the temporary digital registers into the improved intermediated system.
This represents the intended end-state of the project: a fully digital market in which securities are held and administered through intermediaries. The government has emphasised that the digital register model introduced in Step 1 is intended to be a transitional stage rather than the final position of the reform programme. Detailed design proposals and implementation timings remain under development.
No immediate need for constitutional amendments
One of the most significant practical points for companies is that the transition will not depend on prior amendments to their articles of association.
DEMAT has expressly recognised that the implementing legislation should override existing constitutional provisions that conflict with the new regime. While companies may ultimately wish to remove outdated references to certificated holdings and paper certificates, such changes are expected to be administrative rather than essential to the operation of the new framework.
To assist with that process, an industry working group led by the GC100 is expected to develop model drafting and guidance. Those materials are intended to facilitate any consequential housekeeping amendments at companies' first AGMs following implementation of Step 1.
Looking ahead
The next key milestone will be publication of the implementing legislation. In the meantime, issuers should focus on understanding the practical implications of the proposed reforms and engaging with registrars on any operational changes that may be required.
DEMAT is also expected to coordinate a public awareness campaign to help explain the reforms to shareholders and other market participants in advance of implementation.
Although companies may ultimately wish to update their constitutional documents, the DEMAT report indicates that any such changes are likely to be consequential in nature and can generally await publication of the legislation and anticipated GC100 guidance. With Step 1 not expected to take effect until late 2027, there remains time for issuers to assess the final framework before considering whether any constitutional updates are appropriate.
For more information about how our Corporate team can help you navigate the DEMAT implementation plan and its impact on your company, contact us today.
