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BP, Shell, BAE Systems and other top UK companies are mounting a lobbying push to make shareholder registers fully digital, fearing that a planned overhaul will fall short and leave London further behind rival listing venues.
Big companies have long argued that the UK’s share ownership system has failed to keep up with other countries and saddles them with millions of pounds in wasteful spending.
Ending the use of physical share certificates is widely seen as a first step to modernising how UK-listed companies communicate with their shareholders and tackling the estimated two tonnes of paper sent by London-listed groups to custodian banks every day, much of which piles up in wheelie bins.
Tens of thousands of shareholders in each of the UK’s biggest public companies still hold paper shares, with some companies sending more than 500,000 pieces of paper to inform them of annual meetings.
The practice costs companies millions of pounds a year with additional expenses for shareholder votes on takeovers.
Sir Douglas Flint, chair of asset manager Abrdn, was appointed by ministers two years ago to review the system as part of efforts to revitalise the UK’s ailing capital markets, which have been hit by a series of companies moving their main listings overseas.
Most shares in London-listed companies are held digitally through a central depository, known as CREST. But companies must maintain a separate register for a minority of investors, usually with low-value holdings, who still hold paper share certificates.
Last year, Flint, a former chair of HSBC, provisionally recommended a move towards full digitisation with all shares held through the depository. The proposal was backed by several large listed companies, such as Shell; industry groups such as TheCityUK and UK Finance; and the GC100 group of FTSE 100 company secretaries.
But Flint has alarmed some companies and banks after signalling in private meetings in recent weeks that he may make a less sweeping recommendation in his final report, expected to be published by the autumn, City executives told the Financial Times.
The new approach would almost certainly still involve abolishing paper shares, they said.
But it is feared that a watered down reform could force some companies to replicate their existing paper system in digital form, in addition to CREST, meaning they would still have the expense of maintaining two registers, the people added.
BP, Shell, BAE Systems and National Grid — some of the UK’s most valuable listed companies — were involved in GC100 discussions in recent days to launch a fresh push for an “irreversible” move towards full digitisation, according to people involved and emails seen by the FT.
Lobby groups TheCityUK, UK Finance and the Association for Financial Markets in Europe have also been involved in discussions about a letter asking Flint to stick to his original proposal, the people added.
A row over the issue could undermine efforts to revive London’s reputation as a listing venue for big international companies, including a revamp taking effect this month of the UK’s stock market listing rules.
One person who has been involved for years in talks to modernise the City of London’s rules said it would be “mad” if the debate over how to digitise UK company share registers was to drag on.
“The London market can’t afford to have these peculiarities — even if it could in the past — that don’t exist somewhere else,” said another person involved in the discussions on behalf of one of the UK’s biggest companies.
“Imagine Elon Musk getting told he needs to employ a registrar because people are entitled to [hold shares outside the fully digital system].”
However, Flint has been lobbied heavily by groups opposed to full digitisation, including registrars which make millions of pounds from administering the current system and argue that mandating the use of CREST would deny retail investors the option of holding shares directly instead of through a nominee.
Any changes must also avoid making London less attractive to international companies with dual listings overseas, according to a person who attended the recent meetings.
Flint’s provisional recommendation of full digitisation could pose problems for companies with separate shareholder registers for overseas branches, as they may not be able to fully digitise these in the UK, said one person familiar with the matter.
Some of the UK’s largest companies have branch registers in Hong Kong, including banks HSBC and Standard Chartered and insurer Prudential, the person noted.
Flint, The CityUK, UK Finance, Shell, National Grid and BAE declined to comment. BP did not respond to a request for comment.