The Securities and Exchange Commission of Pakistan has made it mandatory for unlisted companies to convert their physical shares into book-entry form, requiring a transition to the Central Depository System before undertaking specified share-related transactions. The regulatory move marks a decisive step toward digitizing corporate shareholding structures and reducing reliance on paper-based certificates.
According to the official press release, the requirement will apply to unlisted companies planning the transfer of shares, issuance of bonus shares, issuance of right shares or shares other than by way of rights, and buy-back of shares. Companies will need to shift their shareholding records to the Central Depository System prior to executing any of these transactions. The directive effectively formalizes the migration of unlisted firms from manual, certificate-based processes to electronic records maintained within the CDS framework.
The transition is intended to modernize record-keeping practices and align unlisted companies with evolving capital market infrastructure standards. By mandating book-entry form for shares, the regulator aims to promote transparency, improve traceability of ownership, and minimize risks associated with physical documentation, including loss, forgery, and administrative delays.
To support companies in complying with the new requirement, the Central Depository Company has introduced a one-year fee relief package for existing unlisted companies converting their physical shares into book-entry form. The incentive structure is designed to reduce initial financial barriers and accelerate adoption of the electronic system.
Under the announced package, companies with paid-up capital of up to Rs25 million will have their annual fee waived for the first year following conversion. In addition, the security deposit fee, initial conversion deposit, and security deposit processing fee will be waived for all unlisted companies during the same period. This broad waiver structure lowers upfront conversion costs, particularly for smaller entities.
For unlisted companies with paid-up capital exceeding Rs25 million, the relief will still apply to security deposit and conversion-related charges for the first year, although they will be required to pay the applicable annual fee. The incentive framework thus provides tiered support based on company size while maintaining a standardized approach to conversion.
The relief package will also extend to unlisted companies that voluntarily opt to convert their physical shares into book-entry form, even if they are not immediately undertaking share transfers or related corporate actions. This provision encourages proactive compliance and early adoption of the CDS environment.
The measure underscores the regulator’s broader push toward digitization within Pakistan’s corporate and financial ecosystem. By encouraging a paperless shareholding environment, the Securities and Exchange Commission of Pakistan seeks to streamline corporate processes, enhance investor confidence, and strengthen governance standards among unlisted entities.
The shift to electronic records is expected to simplify future corporate actions, reduce processing time, and improve regulatory oversight. As companies prepare to implement the transition, the combination of mandatory requirements and temporary fee relief aims to balance compliance obligations with practical facilitation, ensuring a smoother migration to the Central Depository System.
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