Securities and Exchange Commission of Pakistan approves mandatory conversion of unlisted companies’ physical shares to book-entry form through the Central Depository System

The Securities and Exchange Commission of Pakistan has approved a second phase of reforms to digitise share ownership in unlisted companies by transitioning from physical share certificates to electronic (book-entry) holdings in the Central Depository System (CDS) operated by the Central Depository Company. Existing unlisted companies will be required to convert their physical shares into book-entry form before undertaking any share-related transaction, and subsequent transfers, allotments and other share transactions must be executed through the CDS with all parties maintaining holdings electronically; a formal notification is expected. The SECP framed the move as reducing loss, theft, damage and forgery risks associated with paper certificates, and as supporting faster and more secure transfers with real-time, tamper-resistant ownership records. It noted that newly incorporated unlisted companies are already required to issue shares only in electronic form, and that for legacy companies the conversion requirement will apply ahead of transactions including transfers, allotments, rights issues, bonus issues, buybacks and any change in shareholding structure. The Commission also approved procedures for induction into the CDS, covering eligibility criteria, documentation requirements, verification mechanisms and applicable tariffs.