On The Money: Dematerialisation is an intimidating word but the process promises to be hassle free for small investors
On The Money: Dematerialisation is an intimidating word but the process promises to be hassle-free for small investorsDematerialisation will mean the end of paper share certificates but it will not cost you anything or change your relationship with the companies in which you invest.For hundreds of years, if you owned a stake in a publicly-listed company, you were issued with a paper certificate with details of the company and the number of shares held. It was proof of ownership.
That’s been somewhat academic in Ireland’s case as its stock exchange is shedding companies rather than boasting new flotations. And those companies on the exchange have not put out any new issues this year.But, from the start of 2025, it will affect the many people who have share certificates in companies listed in Ireland or elsewhere in the EU in file boxes around their homes because, from January 1st of that year, their share certificates will be worthless.
The reason behind it is largely to harmonise the way the settlement of transactions in shares takes place across the European Union and to ensure that all share registrars operate in a standard fashion. It is also expected to make the whole process more secure and, from a shareholder perspective, make trading in shares a speedier process.
“You can be entirely passive on this. It just happens. You do not have to apply to it. You don’t have to agree to it,” says O’Carroll. “There is no issue with clients holding stock in their own name,” says O’Carroll. “Their name will appear on the register directly and they will be communicated with by the issuer through their registrar [on events like annual reports etc].”
The big issue right now, everyone involved in the process agrees, is communication. While the rules on new issues are already in place, the big “education” piece will come in getting the message out to existing holders of share certificates, many of whom might be older people.
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