Dematerialisation of Paper Share Certificates

A share certificate is a physical piece of paper that represents a shareholder’s ownership in a company. The certificate includes information such as the number of shares owned, the date of purchase, an identification number, usually a corporate seal, and signatures.

The first known share certificate was issued some 416 years ago in 1606, by the Dutch East India Company.

In keeping with the direction of the modern, paperless world, from January 2023 new share certificates will cease to be issued. With the deadline for the abolishment of paper share certificates rapidly approaching, we thought it would be prudent to remind you that there is still time to de-materialise your share certificates and move these into an electronic format.

Whilst many investors feel a sentimental attachment to their share certificates, owning share certificates can be burdensome and there is a risk that they can be lost, damaged or stolen.

Why is it better to hold shares electronically instead of in paper share certificates?

• Automatic collection and reconciliation of dividends.

• Automatic processing of corporation actions – e.g., if further shares are issued, if a company is taken over, share consolidation etc.

• Tax reports are automatically prepared each year to assist with preparation of your tax return.

• Live pricing – you can see the value of the shareholdings at all times.

• Book cost of the shares – the book cost of the share holding can be added to our system so that we can always see live the Capital Gains Tax (CGT) consequences of selling the shares and whether the holding is standing on a gain or a loss.

• Speed and ease of dealing – most stockbrokers can deal T+2 (or even T+1 if required) and we can deal with live pricing.

• Certificated dealing is T+10 and therefore there is no control of the price – you would effectively be selling shares blind.

• Simplifying administration – all shareholdings are held in one place and one valuation is received each quarter, rather than lots of different companies writing. Having share certificates can sometimes present difficulties, too, with valuing estates once the owners have passed away.

• Protection – certificates can be lost, ruined or forgotten about.

• Tax efficiency – if shares are held electronically, they can be held within an ISA. This means that we can sell the shares within the taxable General Investment Account (GIA) and repurchase the holding within the ISA with no rise to Capital Gains Tax (CGT). This cannot be done if the shares are held in certificate form as certificated shares cannot be held within an ISA. Investments within ISAs are free of both income tax and Capital Gains Tax, which affords the holdings the best opportunity to grow.

If you have any paper share certificates and would like to discuss the possibility of consolidating these into a BRI portfolio, please contact one of our advisors on 01676 523 550 or email invest@brigroup.co.uk.